TORONTO (Reuters) - Retreating commodities helped knock 260 points off the Toronto Stock Exchange's main index yesterday, as it was dragged lower by sinking resource shares.

A sell-off in oil and gold, key underlying commodities for the resource-laden Toronto benchmark, sent the materials and energy sectors tumbling 4.8 percent and 2.9 percent respectively.

In the oil patch, Suncor Energy was down C$3.76, or 3.3 percent, at C$111.74, while in the gold producers space, Agnico-Eagle Mines slid C$2.59, or 4.2 percent, to C$59.22.

"Today is a reminder that commodities can impact the TSX to the downside as well as the upside," said Elvis Picardo, investment strategist at Northern Securities Inc in Vancouver.

"So far this year, they've really been propping the index up nicely, while the US indexes have been sliding all along, but today it's the reverse."

A firmer US dollar and easing supply worries carved $3.12 off the price of oil, sending it down to $115.63 a barrel the day after it touched a new high near $120.

Gold was also pulled lower by a rise in the US dollar, falling as low as $868.80 an ounce. On Bay Street, the gold producers subindex slumped 4.5 percent.

The S&P/TSX composite index closed down 260.25 points, or 1.85 percent, at 13,825.60 with all but two of its 10 main sectors pointing south.

Gildan Activewear was among the biggest decliners on the index after the T-shirt maker cut its full year and second-quarter earnings per share guidance. Gildan plummeted C$11.08, or 30.6 percent, to C$25.18.

Potash Corp of Saskatchewan also helped pull the index deeper under water, as the fertilizer company skidded C$12.33, or 6.3 percent, to C$183.27. Its stock had seen a recent steep runup on soaring demand and prices for potash.

"I would say there seem to be a lot of people that have been trying to make their numbers this year by going on pure momentum plays," said Andrew Martyn, portfolio manager at Davis-Rea, about commodities in general.

"And if they catch the momentum play late, and it doesn't work, they seem to run away from that and try to find something else that's working — which is not much out there, actually."

Market volume was 398 million shares worth C$7 billion. Decliners outpaced advancers 1,057 to 496.