* Palladium hits record high of $1,239.50/oz
* Gold on track for second straight day of gains
* Palladium could be bound for correction in short term-analysts
* GRAPHIC-2018 asset returns: tmsnrt.rs/2jvdmXl (Updates prices, adds quote)
By Swati Verma
BENGALURU, Dec 4 (Reuters) - Palladium soared to a record on Tuesday, fuelled by a sustained deficit and speculative interest for the autocatalyst metal, briefly surpassing bullion, which scaled a more than five-week peak as the dollar slid.
Spot gold rose 0.5 percent to $1,237.44 per ounce at 12:22 p.m. EST (1722 GMT), after earlier hitting $1,241.86, the highest since Oct. 26. U.S. gold futures were up 0.3 percent at $1,242.90 per ounce.
Palladium climbed 2.6 percent to $1,235 per ounce, having earlier jumped to an all-time high of $1,239.50.
"We have a tight fundamental market, flat supplies, rising demand and on top of that, undoubtedly some speculative interest which has helped drive prices to all-time record highs," Mitsubishi analyst Jonathan Butler said.
"For the moment, we don't see anything changing; the metal remains in demand for industrial uses, speculators are covering their positions, lease market is very tight, and palladium forwards are in backwardation. We could see some higher prices from here in the very short term."
The metal, used mainly in emissions-reducing auto catalysts for vehicles, has gained about 49 percent since mid-August.
"Palladium continues to fire long signals on all indicators and to make new highs, and is now challenging gold as reduced auto tariffs from China boost demand expectations in an already tight market," analysts at TD Securities said in a note.
However, a few analysts said palladium's rally could run out of steam, and there could be profit-taking at these high levels.
The metal's 14-day relative strength index (RSI) was around 77. An RSI above 70 indicates a commodity is overbought and could lead to a price correction.
"Looking ahead we believe the dynamic of an investor long overhang that has been built-up for palladium, combined with the short overhang in the gold market, will eventually contribute to gold re-establishing its premium over palladium," analysts at Metals Focus wrote in a note.
Meanwhile, gold prices were on track for a second straight session of gains as the dollar continued to be pressured after the United States and China agreed to hold off on fresh trade tariffs for 90 days.
"Primarily it is the weaker dollar that is providing assistance and that will be the key driver in the short term," Capital Economics analyst Ross Strachan said.
"However, gold is going to find it difficult to sustain the current rally unless there is even more dollar weakness."
Investors also kept a close eye on signals on the future path of interest rates next year by the U.S. Federal Reserve, with the central bank widely expected to raise rates at its meeting on Dec. 18-19. Meanwhile, spot silver jumped 1.1 percent to $14.52 per ounce, while platinum dipped 1 percent to $798.40. (Reporting by Swati Verma, Arpan Varghese and K. Sathya Narayanan in Bengaluru Editing by Marguerita Choy and Diane Craft)