The Canadian dollar and the TSX were both sharply lower Thursday, hit hard by plunging commodity prices.

Canada's benchmark stock index closed down 155.94 points to 13,455.38. For a time, it traded below the 13,443 the TSX closed at on Dec. 31, 2010.

"We're pulling back from some very overbought conditions," ScotiaMcLeod wealth advisor Chris Kuflik said. "Are we going into a tailspin right now? I don't think so, there isn't enough data to suggest that."

The Canadian dollar closed down 1.05 of a cent to 103.28 cents US, caught up in a global sell-off for the raw materials that have been driving Canada's currency in recent months.

Almost all commodities were lower.

June crude on the New York Mercantile Exchange fell $9.44 to close at $99.80 US a barrel, down from a 2 1/2-year high above $114 US late last week, and its first drop below $100 since March 17. Oil is Canada's largest single commodity export.

Gasoline prices hurt consumers

Industry and government surveys released this week show that Americans are buying less gas as pump prices rise. Investors are increasingly concerned about the impact of higher fuel prices on the American economy.

"Gasoline has certainly put us at a tipping point," analyst and trader Stephen Schork said. "The economy is in a precarious situation. Everyone knows that now."

June gold closed down more than two per cent, or $33.90, to $1,481.40 and July silver lost $1.3148 to $36.24 an ounce.

CME Group, the owner of the main U.S. metals exchange, has cut the amount traders can do on credit four times since April. Silver prices are down over 20 per cent this week after soaring to almost $50 at the end of last week.

In New York, the Dow Jones Industrials Average lost 139.41 points to 12,584.17.

Worries about U.S economic growth have grown this week, reflecting a disappointing read on employment growth  and much lower than expected expansion in the service sector.

"Whether it be silver or oil but the best example is silver, you had this speculation that just moved it up and then the speculative bubble starts to deflate and we get back more to reality," Kuflik said.

Trichet's comments disappoint

Investors were also disappointed by comments earlier in the day by European Central Bank head Jean-Claude Trichet.

Trichet offered struggling Greece, Portugal and Ireland a little bit of relief by signaling that the bank would not raise interest rates as fast as the markets had been expecting.

The bank left its key rate unchanged at 1.25 per cent, as expected. Trichet also signaled that another rate hike next month was not likely, saying the bank would "monitor very closely" all risks to inflation, language that economists say indicates no rate increase at next month's meeting.

Investors had been expecting Trichet to say the ECB was practicing "strong vigilance" over inflation, which in the past has been interpreted as a rate increase the following month.

With files from The Canadian Press