Gold and silver prices fell sharply on Thursday as stronger-than-expected US producer inflation boosted expectations of further Federal Reserve rate hikes, while the European Central Bank (ECB) raised borrowing costs.

Silver fell 5.5% to $63.62 per ounce as of 1905 GMT, while gold declined 1.8% to $4,318.60 per ounce, The Caspian Post reports, citing Anadolu Agency.

The precious metals came under pressure after data showed that US producer prices increased 0.4% month-on-month in August.

Annual producer inflation accelerated to 5.4%, exceeding market expectations of 5.3%. The increase was driven by a sharp rise in energy prices and signs of broader cost pass-through across the economy.

The figures strengthened expectations that the Fed could further tighten monetary policy to contain renewed inflationary pressures.

Money markets priced in a more than 70% probability that the US central bank would raise interest rates at its September 16 meeting.

Meanwhile, the ECB raised its three key interest rates by 25 basis points on Thursday and warned that inflation risks remained tilted to the upside, prompting traders to increase bets on further monetary tightening in the euro area.

Higher interest rates typically weigh on non-yielding precious metals by increasing the opportunity cost of holding them.

Oil prices also rallied amid escalating strikes between the US and Iran in the Middle East, adding to concerns that elevated energy costs could keep inflation high.

Despite Thursday’s losses, silver remained nearly 54% higher than a year earlier, while gold was up more than 19% over the same period.