By John Tilak
TORONTO (Reuters) - Canada's main stock index closed up on Tuesday and hit a 19-month high earlier in the day as gold shares made strong gains on the highest bullion price in nearly two weeks, helping offset worries about the European economy and weakness in financials.
The price of gold climbed more than 1 percent after a top European Central Bank official said the euro zone crisis was not over, which enhanced gold's safe-haven attraction.
Gold-mining stocks, which are still down about 15 percent since the start of the year, typically track the price of the precious metal.
"The long-term drivers are still in place for higher gold prices," said Elvis Picardo, strategist and vice president of research at Global Securities in Vancouver.
"I'm quite positive on the long-term outlook for gold and for gold stocks by extension," he added.
The Toronto Stock Exchange's S&P/TSX composite index (.GSPTSE) closed up 20.09 points, or 0.16 percent, at 12,878.58. It earlier reached 12,904.71, its highest point since August 2011.
The Toronto market's recent rally has led some investors to say that stock valuations are no longer cheap.
"Canada is expensive. Period. There is no way around it," said Wendell Perkins, a senior portfolio manager at Manulife Asset Management, who helps manage about C$1 billion in assets.
"You have big chunks of the Canadian market that are overpriced," he said, pointing to financial, telecom and utility shares.
Seven of the 10 main sectors on the index were in the red on Tuesday.
The materials sector, which includes miners, was up 1.7 percent.
Goldcorp Inc (Toronto:G.TO - News) rose 2.4 percent to C$33.96, and Iamgold Corp (Toronto:IMG.TO - News) climbed 9.1 percent to C$7.45. Fertilizer giant Potash Corp (Toronto:POT.TO - News) was up 1.3 percent at C$42.74.
Energy stocks gained 0.1 percent, with oil prices rising. Suncor added about 0.2 percent to C$31.64.
Financials, the index's weightiest sector, gave back 0.2 percent. Brookfield Asset Management (BAMa.TO) fell 2.2 percent to C$37.81, and Toronto-Dominion Bank (Toronto:TD.TO - News) slipped 0.5 percent to C$84.92.
BlackBerry (Toronto:BB.TO - News) dropped 3 percent to C$14.83 a day after recording a near 14 percent jump on takeover speculation and on plans to start selling its latest smartphone in the United States.
In company news, First Quantum Minerals Ltd (Toronto:FM.TO - News) said it will extend its C$5.1 billion ($4.97 billion) hostile bid for its smaller rival Inmet Mining Corp (Toronto:IMN.TO - News) by a few days after a majority of Inmet shareholders tendered shares in favor of the offer.
Inmet shares were up nearly 2 percent at C$69.98.
(Editing by Jeffrey Hodgson; and Peter Galloway)