Gold and silver prices in New York posted their biggest loses in seven weeks as the dollar strengthened against the euro, eroding the appeal of precious metals as an alternative investment.

Gold and silver generally move in the opposite direction of the dollar, which reached a three-week high against a basket of six major currencies today. Gold has gained 20 percent this year and silver has jumped 43 percent, while the dollar has lost 7 percent against the euro.

``Dollar strength is hurting the metals,'' said Frank McGhee, head metals trader at Integrated Brokerage Services in Chicago. ``Every fund is hitting the door at the same time.''

Gold futures for December delivery fell $16.90, or 2.6 percent, to $624.90 an ounce on the Comex division of the New York Mercantile Exchange, marking the biggest percentage drop since July 18. Prices still are up 39 percent from year ago.

Silver for December delivery dropped 50.5 cents, or 3.8 percent, to $12.695 an ounce. Prices reached $13.37 on Sept. 5, the highest since May 17. The metal still has surged 78 percent in the past year.

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

The dollar index strengthened on speculation U.S. interest rates will remain higher than those in Japan and Europe. A key U.S. rate is 5.25 percent, and the European Central Bank's is 3 percent. The Bank of Japan will probably leave its benchmark interest rate unchanged at 0.25 percent at a two-day meeting starting today, a Bloomberg survey of economists showed.