* Palladium rises for third session running
* Gold could drop to $1,462 -technicals
By Karthika Suresh Namboothiri
Sept 30 (Reuters) - Palladium hit a record peak on Monday, passing $1,700 an ounce, as tight supply of the autocatalyst metal stoked fears the deficit could only widen amid rising industrial demand, while a stronger dollar hurt gold prices.
Spot palladium XPD= rose 0.4% to $1,687.19 an ounce by 1250 GMT, having touched a record $1,700.71. The metal, up for a third straight session, gained 2.4% last week.
"Underlying fundamentals have been supportive all year for palladium and there is a shortfall in supply ... It will extend until the music stops, and right now there's nothing that really is calling for that music to stop," said Saxo Bank commodity strategist Ole Hansen.
"If we see some breakdown in some of the other metals, such as gold or platinum, we may start to see some profit taking that could spill into palladium."
Concerns that supply of the metal used in car exhaust systems could run out has helped to lift prices by more than 33% this year alone, despite a weakening auto sector.
"We think palladium's recovery from August lows is due to a resumption of fundamental tightness as well as some speculative interest. Despite palladium's robust fundamentals, bouts of risk-off would weigh on the market," UBS analysts said in a note.
Gold prices, meanwhile, were weighed down by a robust dollar .DXY as fears of an escalation in the U.S.-China trade war eased.
Markets received temporary reassurance over news that the U.S. administration was considering delisting Chinese companies from U.S. stock exchanges, with a spokeswoman for the White House saying it is not contemplating such a move "at this time". gold XAU= dropped 0.9% to $1,483.84 an ounce. Prices have shed about 3% since hitting a close to three-week high of $1,535.60 on Sept. 24. USD/
"Gold has run out of steam, and is looking for additional news to drive it higher ... The dollar has shown some grip and the strong rally in bonds at the start of this quarter has faded, and markets continue to be well behaved," Saxo Bank's Hansen said.
Spot gold could fall towards $1,462, as suggested by its wave pattern and a retracement analysis, said Reuters analyst Wang Tao. precious metals followed gold, with platinum XPT= down 3% at $902.93 and silver XAG= shedding 2% to $17.19.