* Gold up 1.5% so far this week
* Silver eyes first weekly rise in three
* GRAPHIC-2019 metals performance: http://tmsnrt.rs/2jvdmXl(Updates prices)
By Asha Sistla
Sept 20 (Reuters) - Palladium soared to an all-time high onFriday, with producers locking in stocks of the auto-catalystmetal squeezed by a sustained supply shortage, while gold firmeden route to its first weekly gain in four supported by MiddleEast tensions.
Palladium rose 0.9% to $1,637.13 an ounce as of 1:44p.m. EDT (1744 GMT), having touched a record $1,654.56. Themetal was up 2% so far for the week, on track for a seventhstraight weekly gain.
"Modest producer hedging and speculative interest in anextremely illiquid market has driven borrowing costs in themetal sharply higher," said Tai Wong, head of base and preciousmetals derivatives trading at BMO.
"Last Friday it cost perhaps a percent to borrow for a month, today it has been borrowed at 5%. The market hasbeen and remains in fundamental deficit, so conditions arelikely to remain tight for some time."
The price of palladium, used mainly in emissions-reducingcatalysts for vehicles, has surged about 30% this year.
"Fundamentals have not changed but no one buys way inadvance. They buy when they need, typically manufacturers. Somanufacturers have come in and done some long-term hedging,driving the price high," said an analyst based in New York.
"And when a trend starts occurring like that, then you havethe industries jumping on the bandwagon, which drives it evenhigher."
Spot gold, meanwhile, gained 0.6% to $1,508.63 perounce, up about 1.5% so far this week. U.S. gold futuressettled up 0.6% at $1,515.10.
"It's a bullish consolidation we see," said Fawad Razaqzada,market analyst with Forex.com, adding that bullion is also beingsupported by safe-haven interest driven by tensions in theMiddle East.
The United States said it was imposing sanctions on Iran'snational bank after last weekend's attack on Saudi Arabian oilfacilities. Iran denies involvement in the attack.
The Federal Reserve cut interest rates for the second timethis year on Wednesday but gave mixed signals on future ratecuts.
Lower interest rates reduce the opportunity cost of holdingnon-yielding bullion and weigh on the dollar, making goldcheaper for investors holding other currencies.
"(The) Global outlook still looks quite unfavourable andcentral banks around the globe will continue to ease monetarypolicy, which will be beneficial for gold," said FXTM analystLukman Otunuga.
Markets also focused on U.S.-China trade talks in Washingtonbefore high-level discussions next month.
Silver firmed 0.3% to $17.83 an ounce, up about 2%for the week and was heading for its first weekly gain in three,while platinum remained flat at $937.82.(Reporting by Asha Sistla and Brijesh Patel in Bengaluru;Editing by Dan Grebler and Grant McCool)