Palladium prices broke above $1,500 for the first time on Wednesday due to a prolonged supply deficit, while gold rose to a fresh 10-month high as the dollar struggled before the U.S. Federal Reserve's policy meeting minutes.
Palladium is crucial in the making of catalytic converters used in exhaust systems of vehicles, and an improvement in demand from the auto sector has supported the metal's surge.
"Demand (for palladium) is increasing year by year because of catalyst demand for gasoline engines. Environmental requirements are getting stronger, which means more palladium is needed in (manufacturing) a car," said Yuichi Ikemizu, Tokyo branch manager at ICBC Standard Bank.
Furthermore, the supply deficit is likely to widen this year as stricter emissions standards increase demand for catalytic converters, Britain-based autocatalyst manufacturer Johnson Matthey said last week.
Spot palladium rose to an all-time high of $1,500.50 per ounce and was 0.8 percent higher at $1,492 an ounce as of 0603 GMT. The autocatalyst metal has gained almost 19 percent so far this year, making it one of the best performing metals.
Gold prices hit their highest since April 19, 2018 as the dollar was capped on falling U.S. Treasury yields and optimism surrounding trade talks between the United States and China.
U.S. President Donald Trump said on Tuesday that trade talks with China were going well and suggested he was open to pushing off the March 1 deadline to complete negotiations.
Most investors expect uncertainties over U.S.-China trade talks to end this week, which will weaken the dollar and support gold, said Hareesh V, head of commodity research at Geojit Financial Services.
Progress in trade discussions between the world's top two economies has whisked off the safe-haven appeal for the dollar, making gold more attractive to investors.
Spot gold was up 0.1 percent at $1,342.45 per ounce after rising to a high of $1,346.73 earlier in the session.
U.S. gold futures rose 0.1 percent to $1,345.7 an ounce.
Investors are now looking ahead to the release of U.S. Federal Open Market Committee's minutes from its Jan. 29-30 policy meeting at 1900 GMT.
"The dovish shift in U.S. Federal Reserve language over the year-to-date has improved the fundamental outlook for gold prices," Fitch Solutions said in a note.
"A less steep trajectory for U.S. rate hikes bolsters our existing view that U.S. dollar gains are behind us and that this will help put a ?oor under gold prices."
Spot gold may peak around a resistance at $1,351 per ounce, as suggested by a projection analysis and a rising trendline, according to Reuters market analyst Wang Tao.
Among other precious metals, platinum inched 0.1 percent higher to $818.50 per ounce, while spot silver was up 0.4 percent at $16.04.
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