Palladium plunged after mining companies and union officials in South Africa tentatively agreed on a proposal to end a nearly five-month-long strike that has halted production of both metals.
Palladium prices had touched a 13-year high amid concerns that the prolonged strike would lead to a global shortage of the metal.
Platinum prices have also climbed, though weaker demand and bigger stockpiles limited gains. Both metals are used in car exhaust filters.
South Africa produces about 80 per cent of the world's platinum and 40 per cent of the world's palladium. The metals are often found and mined together.
Investors sold both metals after South Africa's three largest platinum-mining companies said they agreed "in principle" on a wage deal with the Association of Mineworkers and Construction Union, though union members still need to accept the proposal.
Palladium for September delivery, the most-active contract, tumbled $US40.75, or 4.7 per cent, to $US819.40 a troy ounce on the New York Mercantile Exchange.
This was the steepest one-day percentage drop in nearly a year and the lowest settlement in three weeks.
Platinum for July delivery fell $US39.80, or 2.7 per cent, to settle at $US1,441.30 an ounce on the Nymex.
It was the biggest one-day percentage drop since September.
Gold for delivery in August rose $US12.80, or one per cent, to $US1,274 an ounce on Comex.
