Sept 10 (Reuters) - Gold prices dropped over 1% on Thursday after robust U.S. inflation data and rising oil prices increased bets for a Federal Reserve rate hike next week.
Spot gold slipped 1% to $4,358.09 per ounce by 11:14 a.m. EDT (1514 GMT), while U.S. gold futures fell 1.4% to $4,400.60.
The Producer Price Index (PPI) 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.
PPI for final demand rose 0.4% last month after an upwardly revised 0.1% gain in July, the Labor Department's Bureau of Labor Statistics said on Thursday.
Traders are now pricing in a 70% chance of an increase in U.S. interest rates 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 rates steady at its September 15-16 meeting and for the rest of the year.
The U.S. dollar rose, making greenback-priced bullion more expensive in other currencies, while higher benchmark 10-year U.S. Treasury yields further pressured gold.
Bonds have to reflect more persistent and higher inflation from steeper oil prices, which sees gold prices drop, Rodda added.
Rising bond yields typically pressure gold by raising 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.
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 slid 4.2% to $64.47 per ounce, platinum dropped 4.6% to $1,808.42 and palladium fell 3.9% to $1,300.75.
Reporting by Pablo Sinha in Bengaluru; Editing by Joyjeet Das
