Palladium and platinum edged up on Friday, after falling sharply in the previous session on expectations the longest strike in the history of South Africa's mines would end soon.
The leader of South Africa's AMCU union said on Friday a wage deal with the world's top three platinum producers was imminent, in a sign the longest mining strike in the country's history may soon be over.
The crippling five-month strike, which has spurred buying from industrial users and investors, has lifted palladium prices by more than 15 percent so far this year, outpacing platinum. Both precious metals are used in auto catalysts and jewellery.
Palladium rose $3.25 an ounce to $825.25 by 0637 GMT. It plunged about 4 percent to a three-week low of $814.70 an ounce on Thursday, just a day after it rallied to a 13-1/2 year high on signs of a deadlock in wage talks.
Palladium was on track for its first weekly fall in five, but a global supply deficit and a correction in prices will continue to underpin the metal, dealers said.
"We are still not sure how long it will take for the operation to fully recover. Fundamentally, demand is still quite strong, compared with supply," said a physical dealer in Tokyo, who also trades platinum group metals and bullion.
"Even though the price is high, physical consumers have to buy palladium, especially the auto catalyst sector."
Data from refiner Johnson Matthey showed the deficit in the palladium market is set to widen to 1.612 million ounces this year, its largest shortfall in at least 34 years.
Platimum rose $12.80 an ounce to $1,447.30, having dropped nearly 3 percent on Thursday - its biggest daily drop since June last year.
Gold fell $1.36 an ounce to $1,271.50, although violence in Iraq could burnish its safe-haven appeal.
The United States is not ruling out air strikes to assist the Iraqi government fight a growing radical Islamist insurgency, President Barack Obama said on Thursday, raising the possibility of the first American military intervention in Iraq since the end of the U.S.-led war.
Gold prices have gained more than 1 percent so far this month, after shedding more than 3 percent in May.
Premiums for gold bars in Singapore, a centre for bullion trading in Southeast Asia, were steady at 80 cents to $1.20 an ounce to the spot London prices.
"After prices came off a little bit, we saw some physical buying. But generally this week is rather quiet," said Brian Lan, managing director of retailer GoldSilver Central Pte Ltd in Singapore.
U.S. gold was at $1,271.60, down $2.40
Premiums in Hong Kong were quoted at 80 U.S. cents to $1.20 to the spot London prices, while in Tokyo, gold bars were offered at discounts of 25 cents to on par.
In other markets, Asian equities fell and crude oil hovered near nine-month highs as escalating civil war in Iraq hit risk appetite.