* Dollar hovers close to a near two-week peak
* Palladium soared to record high on Tuesday
* Platinum slips from over two-month peak (Recasts, adds comments, and updates prices)
By Shreyansi Singh
May 5 (Reuters) - Gold prices edged lower on Wednesday as a stronger dollar and prospects of higher U.S. interest rates dampened the allure of the safe-haven metal, while palladium held firm after scaling a record peak in the previous session.
"A stronger dollar and Treasury Secretary Yellen's rate-hike comments overnight continue to weigh on sentiment in Asia, with multiple failures ahead of the $1,800 an ounce region," OANDA senior market analyst Jeffrey Halley said.
Yellen on Tuesday said she sees no inflation problem brewing, downplaying earlier comments that rate hikes may be needed to stop the economy overheating as U.S. President Joe Biden's spending plans boost growth. interest rates dull gold's appeal as it increases the opportunity cost of holding non-yielding bullion.
Investor focus is expected to shift to April payrolls data due on Friday for further cues on the health of the U.S. economy.
So far, Federal Reserve Chair Jerome Powell has argued the labour market is still far short of where it needs to be to start discussing tapering asset buying.
Elsewhere, palladium XPD= rose 0.5% to $2,999.49 per ounce after hitting an all-time high of $3,017.18 in the previous session, driven by concerns of a shortage of the metal.
"Rallies in palladium and platinum are being driven by disrupted or limited supply of both metals meeting a huge jump in demand by car manufacturers," Halley said. used mainly in emission-reducing auto catalysts for vehicles, has risen more than 22% so far this year.
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