PRECIOUS-Gold falls over 1% as U.S. inflation data boosts Fed hike bets

The producer price index data "sort of tells us that there has been a bit of a pickup in underlying inflation in the U.S. economy, and a part of that is due to rising energy costs," said Kyle Rodda, senior financial market analyst at Capital.com.

U.S. producer prices increased in line with expectations in August amid a rebound in the cost of energy products.

Traders are now pricing a 70% chance of a rate hike next week, up from 62% before the data, according to the CME FedWatch Tool.

A majority of economists polled by Reuters expect the Fed to hold interest rates steady at its September 15-16 meeting and for the rest of this year.

Meanwhile, the European Central Bank on Thursday raised interest rates the second time this year, seeking to quell an energy-driven rise in inflation triggered by the war.

Among other metals, spot silver XAG= slid 4.2% to $64.47 per ounce, platinum XPT= dropped 4.9% to $1,802.48 and palladium XPD= fell 4.3% to $1,295.23.

The U.S. dollar climbed, making greenback-priced bullion more expensive in other currencies, while higher benchmark 10-year U.S. Treasury yields further pressured gold. USD/ US/

Bonds has to reflect more persistent and higher inflationary pressures from higher oil prices, which is seeing gold prices drop, Rodda added.

Rising bond yields typically pressure gold by increasing the opportunity cost of holding the non-yielding asset.

Oil prices jumped 4% on Thursday with benchmark Brent crude hitting $105 a barrel, after the biggest spike in attacks on shipping since the start of the U.S.-Iran war spurred supply disruption concerns. O/R