MCX Gold futures slipped in domestic trading Friday morning as a surging U.S. dollar and escalating global inflation fears dampened appetite for the precious metal, setting bullion up for its second consecutive weekly loss. MCX gold futures for June delivery fell 0.25% to Rs. 1,59,202 per 10 grams in early deals. Silver futures for July delivery also felt the pressure, dropping 0.43% to Rs. 2,73,690 per kilogram.

The downward pressure stems from a potent mix of geopolitics and monetary policy. The two-month-old conflict between the U.S. and Iran has sent crude oil prices soaring—Brent crude jumped another 2% Friday following reports that Iran’s supreme leader rejected exporting the country’s uranium stockpile.

While geopolitical friction typically drives investors to safe-haven assets like gold, this energy spike has instead stoked fears of a persistent inflation flare-up. Investors are increasingly betting that central banks, including the U.S. Federal Reserve and the Reserve Bank of India, will respond with interest rate hikes later this year to cool the economy. According to CME Group’s FedWatch tool, traders are now pricing in a 60% chance of a Fed rate hike by December.

Because gold yields no interest, its appeal diminishes when yields and interest rates rise.

Compounding the pressure, the U.S. dollar hovered near a six-week high on Friday. A stronger greenback makes dollar-denominated commodities more expensive for international buyers, capping gold’s recovery attempts. The market is also closely watching Washington, where Kevin Warsh is scheduled to be sworn in as the new Federal Reserve Chairman today.

Despite the immediate pullback, some analysts view the decline as a temporary consolidation after a massive broader rally.