A global economic recovery is underway, but widespread inflation threatens to take hold as stimulus efforts have repercussions and consumer demand returns, Ned Goodman, chairman of DundeeWealth Inc. said on Monday.

“We’re started down the road to recovery,” said Goodman, speaking to members of the Toronto CFA Society. He expects to see the U.S. economy return to growth in 2010, along with emerging economies that were hit by the recession.

As the recovery sets in and global economic growth returns, Goodman expects to see global inflation take hold. He noted that several countries around the world have undertaken unprecedented quantitative easing actions to improve liquidity conditions during the recession.

“We’re in unchartered waters for printing of money,” he said, adding that in time, this will lead to “significant inflation.”

Goodman said it would be dangerous for the U.S. Federal Reserve to make efforts to prevent inflation in the current environment, since economic conditions and consumer confidence remain very fragile.

“For the Fed to react in the current environment would cause a recession even greater than what we’ve already seen,” he said.

With inflation looming, Goodman is bullish on gold. Currencies such as the U.S. dollar are set to deteriorate in value, he said, which will likely boost the prominence of gold as a global currency.

“This new environment makes gold the go-to asset as the foundation for a new global reserve currency,” he said.

Goodman pointed out that the bull market for gold has lasted for a decade, and he expects this to continue. He noted that it was one of the few assets that was protected from the losses of the financial crisis.

In the months to come, Goodman expects gold equities to perform especially well. He said many gold stocks have not yet reacted to the rise in the price of gold, leaving strong upside potential.

Once the economy has recovered, Goodman also expects to see another bull market for equities broadly. He said the rally will likely drive the Dow Jones industrial average to a level of 1,150 or 1,200 within the next two years.

Resources are also poised to perform well as the economy recovers. Goodman expects the market of middle class consumers to expand rapidly in emerging markets such as China and India. In fact, as many as 300 million to 500 million people could join the global middle class in the next five to 15 years. This trend will continue to rising demand for energy and materials, Goodman said.

“By 2011, with the help of inflation and the lower U.S. dollar, resource commodities, agricultural commodities, and the companies that produce them, will be the place to have been invested,” he said.

This strength in resources also bodes well for the Canadian economy and stock market, Goodman noted.

IE