Something a reader sent in:

Apollo@credit spreads&gold --  trotsky, 11:37:47 04/01/08 Tue
"However, one look at Credit Spreads says, nothing has changed."

i wonder what spreads you are looking at. a number of things have changed in fact. e.g. credit default swaps on weak broker dealers like LEH have come in massively - they're down some 70-75% from their recent highs. CMBX spreads have also come in quite a bit, especially the higher grade ones that have been reason for so much worry. corporate spreads are also beginning to come in, if reluctantly, especially in the areas that have been the biggest head-ache. what remains in the dumps are the ABX HE indices - nothing has changed there, they remain stuck at armageddon levels.
mind you, i agree that the credit crisis is far from over, but currently it's clearly pausing, and that has hurt gold a lot.
the question is now where the correction in gold is likely to stop - i would suggest if the bull remains intact, then we shouldn't see anything worse than a retest of the break-out over the 1980 high at about 850-860. today gold has fallen through an uptrend line, which has immediately prompted more selling, which on the face of it is quite bad - however, it's not unusual after a very old high has been broken to the upside to see the commodity in question running a while and then returning for a retest of the break-out. it happened in crude oil too after all.
what we do not want to see is a break of 850. if that happens, it would indicate a very big correction is in the works imo. note that a tiny dollar bounce has been enough to rip gold to shreds recently, and it seems likely to me that the dollar will bounce a good deal more - DXY 78 is definitely possible. so gold also needs to divorce itself from el bucko, which could happen of course, but is not what is happening now or recently.
in addition, the HUI needs to hold the 400 level imo.
my current default assumption is that both PoG 850-860 and HUI 400 will hold, and that we'll get a blow-off like upside move thereafter (think gold $1300-1400). however, should the market decide otherwise and break these supports, one would need to reassess the situation very carefully. after an 8 year long bull market we could easily see one or two years of bearish action - if that were in the cards, you wouldn't want to sit through it.