Palladium slumped 6 percent on Wednesday as investors booked profits after a rally to record highs and slowing global growth cast doubts over demand for the autocatalyst metal, while gold slipped on a stronger dollar.
Palladium fell 6 percent to $1,445 per ounce, the lowest since Feb. 18. The metal had hit a record $1,620.52 last week.
U.S. gold futures settled $4.60 lower at $1,310.40.
"Net longs have stayed steady in palladium for the better part of six months and this surprising retreat in gold seems to have triggered profit taking in palladium. It is a very illiquid market which magnifies the price moves," said Tai Wong, head of base and precious metals derivatives trading at BMO.
The slide pared gains from palladium's over 15 percent rally this year fueled by a sharp supply deficit.
"It seems that global recession fears start to hurt palladium as well," Commerzbank analyst Carsten Fritsch said.
Anglo American Chief Executive Mark Cutifani's comment that palladium was in a market "bubble" weighed on prices.
A gauge of world stocks slipped on fears of a global economic slowdown, while benchmark U.S. Treasury yields sank to fresh 15-month lows and German bond yields fell further below zero.
The gloomy economic scenario offered only limited support to gold, which gave back early gains and dipped 0.2 percent to $1,312.67 per ounce, as the dollar rose.
"The sudden selling looks like long liquidation after gold failed to rally in the face of sharply lower yields and the U.S dollar has been stubbornly bid," BMO's Wong said.
The U.S. dollar index was up 0.2 percent, making bullion more expensive for holders of their currencies.
On Monday, bullion had touched $1,324.32, the highest in more than three weeks.
"Selling pressure (in gold) has been consistent ever since gold and silver prices came off this week's high of $1,324," said Walter Pehowich, executive vice president of investment services at Dillon Gage Metals.
Investors awaited the latest round of China-U.S. trade negotiations in Beijing on Thursday, as well as British Prime Minister Theresa May's address to Conservative lawmakers at 1700 GMT, possibly to set a timetable for her departure in a final bid to win support for her twice-rejected Brexit deal.
Silver was down 0.8 percent at $15.30 per ounce, while platinum dipped 0.1 percent to $854.56.