The spot price of platinum, a metal used mainly in jewellery and to clean car exhaust fumes, jumped to $955 a troy ounce in European trade from $937/942 last quoted in New York on Tuesday, before retreating to $949/953 by 1530 GMT.
Dealers said platinum jewellery makers would take to the sidelines because of high prices, and some might shift to palladium for their needs.
"Platinum is being bought very steadily. There has been some short covering by the funds," an analyst in London said.
Analysts said technical factors fuelled the metal's rise.
"It has broken resistance of $952 and, on a technical basis, this should be a strong footing for further gains," said Yingxi Yu, precious metals analyst at Barclays Capital.
Analysts saw platinum prices rising further in coming months as fundamental factors were supportive and demand from the automobile industry was rising because of increased production of cars that run on diesel fuel.
While palladium is a more efficient catalyst in petrol engines, only platinum is used in diesel vehicles.
Some dealers predicted platinum might rise to the big psychological level of $1,000 in the coming months.
Palladium tracked platinum prices and climbed to $235, a level last seen on October 8, 2004. It eased to $233/237, but was still up from $226/229 last quoted in the US market on Tuesday.
Gold prices inched up in a relatively quiet market, with industry players looking to currencies for direction.
"Now that we have returned to above $460, I think the market would stay in a range of $460-$465 for today," said Peter Hillyard, head of metals sales, Europe, at ANZ Investment Bank.
"I think we would see this market steadily go higher."
Spot gold was quoted at $461.80/462.60 an ounce, up from $461.20/462.00 last quoted in New York.
Silver also gained as consumer demand and technical factors encouraged fund buying, dealers said.
Spot was at $7.64/7.66 an ounce, compared with $7.57/7.60 in New York late on Tuesday.