PRECIOUS-Palladium hits record high on strained supplies, gold dips 1%

* Silver jumps to highest since late February
* Gold to average $1,775/oz in Q2 - analyst
* Graphic: 2021 asset performance http://tmsnrt.rs/2yaDPgn

(New throughout, updates prices, market activity and comments)
By Swati Verma
May 4 (Reuters) - Palladium soared to a record high on
Tuesday on worries over short supplies of the metal used in
emissions controlling devices in automobiles, while gold fell 1%
after U.S. Treasury Secretary Janet Yellen said interest rates
may need to rise.
Spot palladium XPD= rose 0.2% to $2,976.90 per ounce by
1:45 p.m. EDT (1745 GMT), after hitting an all-time high of
$3,017.18.
"There are stricter pollution controls globally that we've
not seen in the past, which means vehicles that were not
previously required to use auto-catalysts will now have to, and
hence more demand," said Bart Melek, head of commodity
strategies at TD Securities.
"For the foreseeable future, the market will be in physical
deficit and prices will go higher," he added.
Concerns about supply shortages were exacerbated after top
producer Nornickel GMKN.MM announced disruptions at two mines
due to flooding. Spot gold XAU= fell over 1% after Yellen said U.S.
interest rates may need to rise to prevent the economy from
overheating as more support programs come on line. Gold was last down 0.9% to $1,776.73 per ounce. U.S. gold
futures GCv1 settled down 0.9% at $1,776.
Higher interest rates increase the opportunity cost of
holding non-yielding bullion.
"Gold failing for the fourth time in two weeks ahead of
$1,800, which has been the top of the range, triggered some
profit taking before it dove $20 on Yellen's unexpected
comment," said Tai Wong, head of metals derivatives trading at
BMO.
"Yellen had a long and consistent history as a dove at the
Fed."
Also reducing bullion's allure for other currency holders
was a stronger dollar .DXY . USD/
"We continue to see prices averaging $1,775/oz in Q2, given
the physical market has cushioned the downside, ETP
(exchange-traded products) outflows have started to slow and the
dovish Fed messaging keeps risks skewed to the upside," said
Standard Chartered analyst Suki Cooper. GOL/AS
Silver XAG= fell 1.8% to $26.40 per ounce, after hitting
its highest since Feb. 26, while platinum XPT= eased 0.2% to
$1,227.73.