NEW YORK--Gold futures edged lower Wednesday

NEW YORK--Gold futures edged lower Wednesday as a stronger dollar kept foreign buyers away from the bullion market.

The most-actively traded contract, for August delivery, was recently down $4.30, or 0.3%, at $1,330.40 a troy ounce on the Comex division of the New York Mercantile Exchange.

Gold prices gave up overnight gains as the dollar rallied against the yen. The dollar shot above the 100-yen level just as Comex floor trading opened Wednesday, sending gold futures into negative territory. The dollar was recently trading at JPY100.33.

Gold is traded in dollars and becomes more expensive for investors who use other currencies, like the yen or the euro, when the dollar strengthens. These traders often shy away from buying gold when the currency market moves against them.

Gold prices are vulnerable to extending their losses as purchases of gold bullion continue to slow, Standard Bank metals strategist Marc Ground said in a note to clients.

"Should physical demand continue to ease, we would expect the metal to move back toward $1,300 an ounce," Mr. Ground said, adding that the Standard Bank Gold Physical Flow Index has declined, pointing to slower physical gold purchases.

Still, gold prices are unlikely to make any sudden moves ahead of Comex option expiration on Thursday, traders at TD Securities said in a note to clients. Comex gold options turn into gold futures upon expiration. The two key strike prices are $1,300 and $1,350 in gold, and $20 in silver, they added.

Gold options open interest, or the number of options contracts left open overnight, reached a record 1.8 million contracts on Monday, according to exchange operator CME Group Inc. (CME), owner of the Comex.

Write to Tatyana Shumsky at tatyana.shumsky@dowjones.com

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