TORONTO (Bloomberg) — Canadian stocks rallied as investors sought a haven in gold, silver and diamond producers from a sell-off in financial companies triggered by concern they will need more capital. The main equity index pared its second weekly drop this year.

Bank of Nova Scotia led a 5.6 percent weekly drop in banks and insurers after Bank of America Corp. required $138 billion in government aid and slashed its dividend to stay afloat. Kinross Gold Corp. rose to the second-highest price this year.

The Standard & Poor's/TSX Composite Index gained 0.5 percent to 8,920.40 in Toronto, for a 1.8 percent drop this week. The aid for Bank of America is making people think about the possibility that Canadian banks will sell more shares to bolster capital, said Martin Roberge, portfolio strategist at Dundee Securities.

"It's about the dilution," Roberge said in a phone interview from Montreal. "People are thinking maybe the rest of the group will have to follow and issue capital."

Bank of America, the largest US lender, fell 14 percent in New York after it reported its first loss since 1991 and cut its dividend to one cent a share from 32 cents. The US will invest $20 billion more in the lender and guarantee $118 billion of assets to help it absorb Merrill Lynch & Co. after its stock lost four-fifths of its value in a year. Citigroup Inc. posted a loss of $8.3 billion, twice the amount analysts predicted.

Bank of Nova Scotia fell 2.9 percent to C$30.45. Royal Bank of Canada, which was cut to "sell" from "neutral" on deteriorating US and Canadian credit quality by Dundee Securities analyst John Aiken in Toronto, slid 1.2 percent to C$33.64. Manulife Financial Corp., Canada's biggest insurance company, slid two percent to C$22.48. Sun Life Financial Inc., the country's third-biggest insurer, fell 3.5 percent to C$26.16.