PRECIOUS-Gold gains on Middle East tensions; palladium hits record high

* Palladium in short supply, touches $1,649.09/oz
* Silver on track for first weekly rise in three
* Gold up 0.8% this week

(Updates prices)
By Brijesh Patel
Sept 20 (Reuters) - Gold edged higher on Friday, heading for
its first weekly rise in four, as investors focused on Middle
East tensions while palladium hit a record peak on short supply.
Spot gold XAU= was up 0.1% at $1,500.47 an ounce at 1314
GMT, up about 0.8% over the week.
U.S. gold futures GCv1 were steady at $1,506.70.
"The jittery situation in the Middle East is one of the
reasons to be concerned and switch to safe havens after
disappointing knee-jerk reaction following the U.S. Federal
Reserve rate cut," said Commerzbank analyst Eugen Weinberg.
Adding to gold's appeal, the United States said it was
building a coalition to deter Iranian threats after last
weekend's attack on Saudi Arabian oil facilities. Another supportive factor was the Fed's second interest rate
cut this year, though the central bank gave mixed signals on
future cuts. "(The) Global outlook still looks quite unfavourable and
central banks around the globe will continue to ease monetary
policy, which will be beneficial for gold," said FXTM analyst
Lukman Otunuga.
Lower interest rates reduce the opportunity cost of holding
non-yielding bullion and weigh on the dollar, making gold
cheaper for investors holding other currencies.
However, a slight dent to gold's appeal came from a firmer
dollar .DXY , which on Friday rose 0.2% against a basket of
major currencies. USD/
Markets also focused on U.S.-China trade talks in Washington
before high-level discussions next month. U.S. and Chinese
deputy trade negotiators resumed face-to-face talks for the
first time in nearly two months on Thursday. "Given potential upside catalysts (for gold) in the coming
months, such as a dovish Fed and trade uncertainty, there is a
risk that investors once again get left behind," UBS analysts
said in a note.
"Indicators suggest that market participants have reduced
longs and are focusing on the $1,480 support area all the way
down to $1,450 as attractive levels to re-engage."
Meanwhile, palladium XPD= jumped 1.2% to $1,643.31 an
ounce, having touched a record $1,649.09. The auto-catalyst
metal, which is in short supply, was up 2.3% over the week and
on track for a seventh straight weekly gain.
"What we're seeing is continuing purchases in palladium not
only by speculators but also car producers. Consumers are
becoming concerned about rising prices and would rather be
buying it now than later," said Commerzbank's Weinberg.
Silver XAG= firmed by 0.1% to $17.78 an ounce, up 2% for
the week and heading for a first weekly gain in three, while
platinum XPT= rose 0.3% to $939.55.