On April 18, Swiss voters approved a referendum on a new constitution, which would, among other changes, remove the gold backing from the Swiss franc. Gold markets had anticipated this vote for many months, and the passage of the referendum seemed to be no surprise to Monday's gold markets, which held firm in London and actually rose 70c in New York.

Of course, Monday's markets in the U.S. had somewhat the look of a watershed: the Internet stocks got hammered as the Dow Jones Internet Index of 40 stocks lost 18.7%, while such old-line "value" stocks as 3M, Alcoa, Eastman Kodak, J.P. Morgan, Exxon, Rockwell, Dow Jones, etc. all rose in price during one of the strangest days ever in the U.S. stock markets.

It's no wonder that gold prices held up amidst all the turmoil in the markets, as gold's value is negatively correlated to virtually all other asset classes, and therefore can reduce portfolio volatility or risk. Gold represents value, and when the formerly high-flying areas of the markets start to look shaky, money flows to the stability of gold.

Michael Molnar, head of global retail sales and trading at Salomon Smith Barney, is quoted in the Wall Street Journal on Tuesday April 20 as saying "There's no doubt that the rotation into the value names has taken a lot of the momentum money out of " the Internet stocks. "There's an absurd level of optimism priced into these stocks that isn't sustainable."

In the gold markets, there has been anticipation of the Swiss vote and rumblings that the IMF would sell off reserve gold in order to alleviate some of the debt pressure on poorer countries. The Clinton administration went on record last week in support of this proposal, as did the International Monetary Fund's managing director Alassane Ouattara and French minister Chirac. In Switzerland, the change in the constitution would remove the link between gold and the Swiss franc, and possibly lead to gold sales. But the proposed sale of some 1300 tonnes of Swiss gold is far from a done deal. Gary Mead, head of research at the World Gold Council, said in an April 12th press release "According to the Swiss National Bank, any sale of gold could only follow a decision by a majority of the Swiss parliament as to what to do with the proceeds. In Switzerland such decisions depend upon the achievement of a prior consensus outside parliament, among a wide variety of political constituencies."

But, this perceived threat of gold dumping has led to a massive short gold positions on the COMEX. The report of April 6th from the COMEX shows that short interest (gold sold in the futures market in anticipation of lower prices in the future) rose in the two weeks leading up to April 6th from 54,029 to 88,363 contracts.

This is 275 TONNES OF GOLD sold short, an all-time record in this country.

So, we find ourselves at an interesting juncture in the financial markets. Massive amounts of gold have been sold short by traders betting on lower prices, and massive amounts of money are lined up in support of the stock market, betting that Monday's action was just a minor hiccup.

In the four days beginning Wed. April 14th, the nine largest Internet stocks lost over $90 billion in market value. That's $90 billion in paper assets, gone up in smoke in four days.

Nine Internet stocks accounted for over $22 billion in market losses PER DAY.

Just as a comparison to illustrate the inflated size of these financial markets relative to gold prices, at $285/ounce, $21 billion is the market value of all the gold mined in the world last year.