Canada is sitting on a gold mine - and a huge oil field

Like many other major markets, Canada has had a fit of the jitters over the past few days. The resources-heavy benchmark TSX index has dropped by 4% as commodity prices have slid from their record highs, while the Canadian dollar has edged off its recent 28-year high against its US counterpart.

Nonetheless, over the longer term, the Canadian market could well prove "simply the best, better than all the rest", as Robin Griffiths says in Rathbone's World Investment Strategy.

There is likely to be plenty of life left in the gold and commodities upswing over the next few years. Canada has large reserves of both. Its oil reserves are a key story: the oil sands in Alberta are thought to contain more barrels of oil than Saudi Arabia's Ghawar field, the largest ever discovered in the Middle East. What's more, political risk is minimal compared to other resource-heavy countries.

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And the Canadian dollar should benefit from global demand for commodities. Michael Levy of Custom House Currency Exchange says that with the era of cheap energy over, the "loonie", now just under 90 US cents, is set to reach parity with the dollar.

But the loonie isn't purely a commodities story; a budget surplus and the prospect of further interest-rate hikes should also bolster the currency, as Wirtschaftswoche points out. It's a "much better bet" for investors than the US dollar over the next few years. So investors in Canadian stocks seem likely to benefit from currency as well as market gains.

With Rathbone's having recently pencilled in an overdue correction in the Canadian stockmarket, investors looking for a good entry point "may want to wait a little". In the meantime, stocks worth eyeing up include Goldcorp (G.TO, CAD37.60), a gold miner with low production costs, and Suncor Energy (SU.TO, CAD88.50), an energy group exploring the tar sands, highlighted by TheStreet.com's James Cramer as a promising long-term Canadian oil pick.

For more on why investing in Canada looks like a very good move, read our recent Money Morning article: Three good reasons why you should buy into Canada now.