Palladium hit a record high on February 19, moving close to $1,500, due to a prolonged supply deficit, while gold rose to a near 10-month high as rising optimism for a US-China trade deal subdued the dollar.
Spot palladium, which traded as high as $1,491 per ounce, was up 1.5 percent at $1,479.49 at 1102 GMT.
The deficit will widen this year as stricter emissions standards increase demand for catalytic converters, autocatalyst manufacturer Johnson Matthey said last week.
"The palladium market is facing a substantially growing physical deficit ... driven more from the demand side due to rising automotive demand," said Philip Newman, director at Metals Focus.
"Also, there won't be a substitution from palladium to platinum as it is very difficult to achieve and takes a very long time to make sure it is compliant."
Both metals are primarily used by automakers in catalytic converters, but platinum is more heavily used in diesel vehicles, which have fallen out of favour since Volkswagen's emissions-rigging scandal broke in 2015.
Unlike platinum, palladium has benefited from the switch away from diesel engines and expectations for growth in hybrid electric vehicles, which tend to be partly gasoline-powered.
This has helped cushion the metal from the impact of falling car sales across the globe.
"It's very difficult to predict in a market which is very small, but we are nearing the $1,500 level, and reaching it is very likely as tightness in the market along with the dollar weakness is providing some lift," Newman said.
Meanwhile, spot gold rose 0.3 percent to $1,329.40 per ounce, having earlier hit $1,330.07, its highest since April 25. US gold futures rose 0.8 percent to $1,332.40.
The dollar was a shade weaker and backed away from a two-month high hit last week.
"Gold is still in a bullish mode. Investors are still pricing in a dovish US Federal Reserve," ActivTrades Chief Analyst Carlo Alberto De Casa said in a note.
Gold has gained 3.6 percent so far this year on expectations the Fed will pause its interest rate hiking cycle and on hopes the world's two largest economies will hammer out a trade deal.
Investors will scan the minutes of the Fed's last policy meeting due on February 20 for more guidance on rate increases this year.
“From a technical point of view, gold has just entered the range $1,325–$1,350 and if prices remain above $1,325, the positive momentum is likely to continue as investors are betting on further rallies of bullion,” De Casa said.
Among other precious metals, platinum was up 0.6 percent at $807.07 per ounce, while silver gained 0.1 percent to $15.81.
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