NEW YORK ( TheStreet) -- Gold prices were slipping on the back of a stronger U.S. dollar. Gold for April delivery was down $1 to $1,124 an ounce at the Comex division of the New York Mercantile Exchange. Prices have traded as high as $1,125.10 and as low as $1,108.20. The U.S. dollar index was rallying 0.20% to $80.60. Gold's spot price was falling $1.90 according to Kitco's gold index. Gold was paring earlier losses, even as the dollar bounced back on euro weakness. Investor fears that Portugal will be the next PIIGS country to be threatened by a default were shaking the currency. Both Greece and Portugal have been implementing austerity measures to rapidly decrease their deficits and avoid an EU financial aid package. Reportedly, the European Commission is working on a proposal for a European monetary fund to help struggling eurozone countries. Gold Prices Test $1,100 Also putting pressure on gold were fears about slowing demand from China. According to Bloomberg, Yi Gang, head of the State Administration of Foreign Exchange said that gold is "unlikely" to be China's primary investment to diversify its reserve holdings. China has increased the amount of gold in its reserves to 1,054 tons over the last five years, which has been a strong support for gold prices. China's total gold holdings are at 1.5% compared to the U.S. and Portugal at 70% and 90%, respectively. Many bullish analysts were looking at continued demand from China to be a strong support for higher gold prices. A hint of slowing diversification of China's reserve holdings could put some short term pressure on gold. George Gero, vice president of global futures at RBC Capital Markets, thinks it's the threat of higher interest rates that is driving the dollar higher and gold lower. "I think the specter of higher interest rates ... seems ... to be hurting most of the metals complex," he said. "... T he Fed has signaled the addition of money funds for overnight repos, ...which means you might possibly have some higher rates and the Fed is looking for additional buyers. ...The specter of higher rates also means a higher dollar." Many analysts are looking at $1,100 as the next critical support area for gold.