Back in November, we looked at the price relationship between gold and silver ("What's Better: Gold or Silver?") from a market capitalization perspective.

That's a novel view for most traders brought up using the more traditional gold/silver ratio. For a long time, the ratio was set by fiat at 15.5-to-1, meaning that one troy ounce of gold would buy 15.5 ounces of silver.

If those laws were still followed today, silver would be trading at $58 per ounce. In 2007, the gold multiple rose from 47x to 57x (see "Gold Vs. Silver" below).

Gold Vs. Silver

So, why IS silver so cheap? I mean the Earth's crust, on average, contains 19 units of silver for every one unit of gold, according to the U.S. Geological Survey. If gold and silver were equally accessible, that makes gold three times more expensive than it "ought" to be.

There's, of course, a big difference between "ought" and "Unload the truck, Lenny."

Theories abound, but there are a few favorite notions. Most commonly mentioned is a large concentrated short position held against futures-deliverable stocks. According to the Commodity Futures Trading Commission's Commitments of Traders report, three or four traders are short about 140 days' worth of silver production.

Better to ask, I think, "Why is gold so expensive?" The simplest argument centers on gold's greater acceptance as a store of value. In times of crisis, it's gold rather than silver that people rush to.

More on this later ...