PRECIOUS-Under-supplied palladium races to record, gold awaits Fed

* Palladium hits record of $2,962.50/oz
* Palladium could break above $3,000 by next month -analyst

(Updates prices)
By Eileen Soreng
April 27 (Reuters) - Palladium prices hit a record on
Tuesday, spurred by persistent supply worries, while gold held a
narrow range as investors awaited policy signals from the U.S.
Federal Reserve's meeting this week.
Palladium XPD= hit a record of $2,962.50 per ounce earlier
and was up 0.9% at $2,952.01 per ounce by 1:43 p.m. EDT (1743
GMT)
"What we're seeing here in palladium is a market that's in a
deeper deficit than many had expected earlier in the year...
That's going to continue to fuel higher prices in the near
term," said TD Securities commodity strategist Daniel Ghali.
At this rate, palladium can trade north of $3,000 by next
month, he added.
Prices of palladium, used in catalytic converters to clean
car exhaust fumes, have risen 20% so far this year.
A Reuters poll returned a higher forecast for palladium
after flooding at the biggest supplier, Russia's Nornickel
GMKN.MM , worsened a shortage.
Spot gold XAU= inched 0.1% lower to $1,778.01 per ounce
with investors focused on the Fed's meeting.
U.S. gold futures GCv1 settled down 0.1% at $1,778.8.
"Gold investors will be watching for any indications from
the Fed as to whether they're seeing any longer-term sustainable
inflation," said Jeffrey Sica, founder of Circle Squared
Alternative Investments.
An acknowledgement of inflation and the anticipation that
there will be more could help gold break above $1,800, Sica
added.
While gold is considered a hedge against inflation that
could follow widespread stimulus, elevated Treasury yields have
dulled the non-yielding bullion's appeal this year.
No major policy changes are expected from the Fed meeting
ending on Wednesday, but investors will pay close attention to
Chairman Jerome Powell's economic outlook. Analysts have slashed their gold price forecasts, with many
believing a return to last year's record highs is unlikely as
the economy recovers. Silver XAG= rose 0.4% to $26.32 per ounce. Platinum XPT=
edged 0.2% lower to $1,240.84.