TORONTO (Bloomberg) — Canadian stocks fell as a retreat in gold stocks and metals prices overshadowed an increase in Canadian building permits and speculation that US interest rates will remain at a record low.

Goldcorp Inc., Canada's second-largest gold producer, fell 3.1 percent as bullion extended its steepest drop in a year as the dollar rose toward a one-month high against the euro. Suncor Energy Inc., Canada's biggest energy company, fell as oil dropped. Potash Corp. of Saskatchewan gained three percent after Goldman Sachs Group Inc. recommended the fertilizer producer.

"People are trying to hedge a real asset against what they perceive to be devaluation of currency," said Michael Sprung, a money manager at Sprung & Co. Investment Counsel Inc. in Toronto, which manages about C$60 million ($57 million). "We've seen some strength in the currency, and so we're seeing some downward pressure on gold."

The S&P/TSX fell 17.96 points, or 0.2 percent, to 11,492.84 in Toronto.

Canada's benchmark stock index climbed 4.9 percent in November as world leaders' pledged to maintain economic stimulus policies such as low interest rates. The S&P/TSX has jumped 36 percent since the U.S. Federal Reserve lowered the federal funds target rate to a range of zero to 0.25 percent last December to spur growth.

Federal Reserve chairman Ben S. Bernanke said today the US economy faces "formidable headwinds" and that inflation remains "subdued".

"Many people are expecting there will be a tendency to hold back on the degree and severity of any rate increase for fear of choking off the economy," Sprung said. "And if we're seeing some strength in housing and some strength in other areas of the economy, people are latching onto that."

Also yesterday, Statistics Canada said building permits surged 18 percent in October, reaching the highest value since September 2008, led by work on single-family homes and non- residential projects.

Agrium Inc., Canada's second-largest fertilizer producer, gained 4.3 percent to C$63.60 after its takeover target, CF Industries Holdings Inc., increased its bid for Terra Industries Inc. to about $4.58 billion. CF is fending off Agrium's takeover bid.

Potash Corp., Agrium's larger Canadian competitor, rose 3.3 percent to C$128.11 after Robert Koort, a Goldman Sachs analyst, boosted his rating of the company to "buy" from "neutral." Koort wrote that "investors are likely underestimating the 2010 U.S. demand recovery that could see staggering" year-over-year increases in volume.