Platinum fell to a 6-1/2-year low on Wednesday, on fears about reduced demand from the auto sector, where it is used in diesel catalysts to clean up exhaust emissions, while palladium, used in gasoline vehicles, surged 7 percent.

The metal has been hurt by news of Volkswagen AG's falsification of U.S. vehicle emission tests as investors believed it could affect demand for diesel cars.

The price of palladium, the predominant metal used in gasoline catalysts, soared on speculation that the Volkswagen scandal could increase demand for gasoline vehicles, traders said.

Spot platinum fell to its lowest since January 2009 at $924.50 an ounce, and was down 0.8 percent at $926.25 at 1 p.m. Minnesota time.

Palladium, on the other hand, surged 7.2 percent to $649 an ounce, the highest since mid-July. It later pared gains and was up 6.1 percent at $642.25 an ounce, on track for its biggest jump since December 2009.

"Diesel, which predominately uses a platinum catalyst, may be damaged as an option for car purchasers because of the Volkswagen emissions scandal, which would conversely be a win for palladium," said Ross Norman, chief executive for bullion brokerage Sharps Pixley.

Norman added that he does not expect diesel vehicles to "go away in a hurry" but that the concentration of platinum group metals may need to be increased to achieve the correct emission levels.

"The plunge in platinum prices suggests ... that platinum devices simply can't meet today's increasingly rigorous government standards for cutting diesel emissions," said Adrian Ash, head of research at online dealer

"If that idea grows, palladium demand may benefit, if not prices, as petrol engines fill the gap."