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Palladium hit a two-year high Wednesday, rising 4 per cent on growing demand by exchange traded funds and a possible supply shortfall.

Other platinum group metals also rose sharply in thin trade as economic optimism boosted auto catalyst demand, while gold and silver also climbed on U.S. dollar weakness.

"Palladium and platinum are driven higher by the ETFs taking physical metals off the market. We continue to see investment flows coming into the market," said Miguel Perez-Santalla, vice-president of sales at Heraeus Precious Metals Management in New York.

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Holdings in ETF Securities Ltd.'s U.S. platinum and palladium funds have risen to almost one million ounces in the combined metals since their inception earlier this year.

Mr. Perez-Santalla also cited a possible shortfall in palladium output related to South Africa's power problems and uncertain supply from top producer Russia.

Palladium hit a high of $548.50 (U.S.), its highest price since March, 2008.

It was at $547 an ounce at 3:01 p.m. ET against $526 late in New York on Tuesday, while platinum was at $1,727.50 an ounce against $1,714.

Other PGMs also took the lead from palladium, with rhodium hitting its highest since October, 2008, at $2,875 an ounce, ruthenium its highest since December, 2008, at $190 an ounce, and iridium a 12-year high at $520 an ounce.

Mr. Perez-Santalla, however, said palladium prices could tumble when investment demand eventually weakens. "We do feel that at this moment the market is very 'toppish', and it's going to struggle to go any higher," he added.

Gold rose on Wednesday as the dollar fell against the euro on disappointment Federal Reserve Chairman Ben Bernanke gave no new guidance on U.S. interest rates.

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The euro was also buoyed after Singapore effectively revalued its currency, and as upbeat U.S. corporate earnings boosted appetite for currencies seen as higher risks.

The Singapore move was viewed as a mark of confidence in the economic recovery.

Meanwhile, a closely watched industry report said investors looking to preserve wealth from a global economic crisis last year bought more gold than did jewellery consumers for the first time since gold was rallying back in 1980.

Record investment demand could drive gold prices to all-time highs in 2010, even though the metal is near the final stage of its 10-year bull market, metals consultancy GFMS Ltd said in its Gold Survey 2010.

Spot gold was at $1,157.15 an ounce against $1,150.15 late in New York on Tuesday. U.S. gold futures for June delivery settled up $6.20 at $1,159.60 an ounce on the Comex division of the New York Mercantile Exchange.

The dollar's fall boosted interest in gold as an alternative asset and made it cheaper for other currency holders.

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Gold was also supported by better risk appetite on the back of positive U.S. corporate earnings, including those of JPMorgan Chase, which increased investor appetite for riskier assets.

Government data showing tame consumer inflation in March failed to drive prices up further.

Silver was last at $18.39 an ounce against $18.18.

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