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UPDATE 1-Palladium prices hit highest since August 2011

* Supply constrained by strike among S.African miners

* Buyers speculate that Ukraine stand-off may hit Russian supply

* Launch of two palladium ETFs in South Africa lifts metal

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LONDON, March 21 (Reuters) - The price of autocatalyst metal palladium hit its highest since August 2011 on Friday as a miners' strike in South Africa ground on and concerns grew that the standoff between major producer Russia and the West over Ukraine could escalate.

Between them, Russia and South Africa produce nearly 80 percent of the world's palladium.

The metal has also benefited from the launch this week of two palladium-backed exchange-traded funds in South Africa. A similarly structured platinum fund launched in Johannesburg last year saw hefty inflows of palladium's sister metal.

Spot palladium hit a high of $791.50 an ounce, its strongest level in more than 2-1/2 years, and was up 3.5 percent at $789.75 an ounce at 1141 GMT.

"We have two potentially large new demand areas for palladium in an already undersupplied market, and with continued uncertainty over the South African supply situation and some speculative movements around Russia, we could see palladium holding these gains," Mitsubishi analyst Jonanthan Butler said.

"If the $800 an ounce level gets tested, we could be in a totally different paradigm," he said.

Miners have been on strike at three South African producers of platinum group metals - Anglo American Platinum, Impala Platinum and Lonmin - since Jan. 23.

The strike by the Association of Mineworkers and Construction Union (AMCU) is the biggest on the mines since apartheid ended in South Africa in 1994 and has cost the companies more than 9 billion rand ($825 million) in lost revenue.

Threats to supply may pique investment interest in the metal, analysts said.

Standard Bank announced on Wedesday that it was due to launch a physically backed palladium ETF on the Johannesburg Stock Exchange on Monday. Absa Capital, which operates the world's largest platinum ETF, said the following day it was also launching a palladium fund.

Investors buy ETFs, which issue securities backed by physical metal, to gain exposure to the underlying commodity price without having to store and insure the material itself.

Palladium ETFs currently hold some 1.634 million ounces of metal, worth around $1.29 billion at today's prices.

"We believe interest will be healthy from institutional investors, and possibly more than the usual one-third of the circa 1 million ounces of platinum taken up in the South Africa-based platinum ETF," Standard Bank analyst Walter de Wet said in a note this week.

"Palladium fundamentals look healthier on a 3- to 5-year view, which implies a bias towards the metal."

(Editing by William Hardy)