Linux – how to prevent image hotlinking in nginx

I am trying to implement image hotlink protection problem in nginx and I need help. I have a huge issue of my site's images being submitted to social networks like StumbleUpon with a direct link like

http://example.com/da.jpg

now i want to block access to them but I cannot implement hotlink prevention in my nginx.conf file.
Below is my nginx.conf file where should I place the code?

Hotlink code to be implemented:

  location ~ \.(jpe?g|png|gif)$ {
    valid_referers none blocked example.com *.example.com;
    if ($invalid_referer) {
        return 403;
    }
}  

My current code is below

{

#user  nobody;
worker_processes  10;
worker_rlimit_nofile 81918;
#error_log  logs/error.log;
#error_log  logs/error.log  notice;
#error_log  logs/error.log  info;

#pid        logs/nginx.pid;


events {
    worker_connections  81918;
    multi_accept on;
}


http {


    client_body_buffer_size 10K;
    client_header_buffer_size 1k;
    client_max_body_size 8m;
    large_client_header_buffers 2 1k;

    client_body_timeout   32;
    client_header_timeout 32;
    sendfile_max_chunk 512k;
    keepalive_timeout 5; # default 65
    send_timeout 20;     # default 60

    reset_timedout_connection on;

    include       mime.types;
    default_type  application/octet-stream;

    #log_format  main  '$remote_addr - $remote_user [$time_local] "$request" '
    #                  '$status $body_bytes_sent "$http_referer" '
    #                  '"$http_user_agent" "$http_x_forwarded_for"';

    #access_log  logs/access.log  main;

    sendfile        on;
    #tcp_nopush     on;

    #keepalive_timeout  5;
    #keepalive_timeout  65;

    #gzip  on;

    server {
        listen       80;
        server_name  localhost;

        #charset koi8-r;

        #access_log  logs/host.access.log  main;

        location / {
            root   html;
            index  index.html index.htm;
        }


        #error_page  404              /404.html;

        # redirect server error pages to the static page /50x.html
        #
        error_page   500 502 503 504  /50x.html;
        location = /50x.html {
            root   html;
        }

        # proxy the PHP scripts to Apache listening on 127.0.0.1:80
        #
        #location ~ \.php$ {
        #    proxy_pass   http://127.0.0.1;
        #}

        # pass the PHP scripts to FastCGI server listening on 127.0.0.1:9000
        #
        #location ~ \.php$ {
        #    root           html;
        #    fastcgi_pass   127.0.0.1:9000;
        #    fastcgi_index  index.php;
        #    fastcgi_param  SCRIPT_FILENAME  /scripts$fastcgi_script_name;
        #    include        fastcgi_params;
        #}

        # deny access to .htaccess files, if Apache's document root
        # concurs with nginx's one
        #
        #location ~ /\.ht {
        #    deny  all;
        #}
    }


    server {
        listen       *:80;
            server_name  dl.rahim-soft.org;

        #charset koi8-r;

        #access_log  logs/host.access.log  main;
        location / {
            root   E:/WWW;
            index  index.html index.htm;

        }
    }
    server {
        listen       *:80;
        server_name  dl1.rahim-soft.org;

        #charset koi8-r;

        #access_log  logs/host.access.log  main;

        location / {
            root   E:/dl1;
            index  index.html index.htm;
        }
    }
    server {
        listen       *:80;
        server_name  dl2.rahim-soft.org;

        #charset koi8-r;

        #access_log  logs/host.access.log  main;

        location / {
            root   F:/dl2.rahim-soft.org;
            index  index.html index.htm;
        }

    }

}