Gold futures fell, extending a slump to a seven-week low, as the dollar’s rally eroded demand for the precious metal as an alternative investment.

The euro fell to an 11-month low against the greenback on concern that European leaders won’t agree on ways to expand the region’s rescue funding as debt-strapped nations struggle to fund deficits. Yesterday, gold slumped 2.8 percent, the most in three weeks.

“The dollar’s strength is working against gold,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “We will continue to see liquidation because of the uncertainty surrounding Europe.”

Gold futures for February delivery dropped 0.4 percent to $1,661.20 an ounce at 1:13 p.m. on the Comex in New York. Earlier, the price touched $1,654.40, the lowest for a most- active contract since Oct. 25.

Imports by India, the largest gold consumer, may decline as much as 16 percent from a record as the rupee’s plunge to an all-time low boosts local prices, according to the Bombay Bullion Association. Purchases may fall as low as 800 tons this year from 958 tons in 2010, Prithviraj Kothari, the group’s president, said yesterday.

Earlier, gold futures climbed as much as 0.8 percent as energy prices jumped on Middle East supply concerns.

Silver futures for March delivery gained 0.7 percent to $31.215 an ounce.