The benchmark index of the Toronto Stock Exchange slid more than 400 points Wednesday and the loonie dropped more than two cents as investors bailed out of commodities.

The S&P/TSX composite index dropped 427 points to a close of 12,709 as a day-long slide in commodity prices picked up speed in late-day trading.

S&P/TSX composite index 3-month chart

Every industry sector lost ground, with the materials, energy and mining sectors taking the biggest hits.

The materials group — which includes gold companies — lost 6.1 per cent as gold futures staged their biggest one-day retreat in two years.

The April gold futures contract fell $58.50 US an ounce to settle at $944.70 US. Gold set an all-time high of almost $1,034 US an ounce just two days ago.

Some analysts said it was profit-taking; others said it was just a correction on a longer-term journey higher.

Oil prices slumped almost $5 a barrel to $104.48 US a barrel, leading to a 4.5 per cent fall in the TSX energy sub-index.

The drop in oil followed the release of U.S. government data that suggested demand for oil and gasoline was falling because of high prices.

The metals and mining group slid 6.2 per cent. Copper, silver and agriculture futures all fell sharply.

Some of the losses suffered by TSX-listed stocks were huge: Barrick Gold shed $3.27 to $46.01; Canadian Natural Resources slid $4.36 to $66.67; Teck Cominco, a big producer of copper, tumbled $3.08 to $38.27; Potash Corp. shares tanked by $12.68 to $146.69.

After such a volatile day, average investors should just "shrug their shoulders and relax," said Bob Tebbutt, vice-president of risk management at Peregrine Financial Group Canada.

He said the long-term outlook for gold, oil, and most base metals is still solid. "The demand for product is there," he told CBC News. "There's no question."

Loonie slips below 99 cents US

The Canadian dollar, which tends to rise and fall in tandem with commodity prices, fell by 2.19 cents against the U.S. dollar, closing at 98.49 cents US.

The Dow Jones industrial average slid 293 points to 12,100 as investors unwound much of Tuesday's 420-point gain following a big interest rate cut from the U.S. Federal Reserve.

Energy stocks like ExxonMobil and Chevron fell almost five per cent. Shares of Alcoa plunged almost eight per cent.

Paul Gardner, a partner at Avenue Investment Management, said markets are still skittish. "We're not out of the woods yet," he told CBC News. "It's going to take a while to figure out which way this market's going."

Gardner also said there were rumours that Merrill Lynch might need to take more writedowns. Merrill shares slid 11 per cent.