On Monday, gold for December delivery finished trading at $810.80 an ounce, up 0.28 percent while silver settled at $14.785, a gain of 1.27 percent on the day.

Clearly, it was better to be an owner of silver than a gold bug. A long position in silver gained $930 per contract, while a gold contract brought in only $230.

When I saw this, I got to thinking about the gold/silver ratio which now stands at 55-to-1.

When coins were first minted by the Greeks two millennia ago, the ratio of gold to silver was a lot lower. Gold's value was closer to 10-to-1 then. In the 1930s and 1940s the ratio reached 90-to-1 and, by 1991, it peaked at about 98-to-1. Traders used to pay a lot more attention to the ratio as a clue to relative value, but nowadays, many claim the ratio is no longer relevant.

One fellow, an admitted silver bug, looks at the ratio with a fresh perspective. Theodore Butler, AKA "The Silver Seeker," takes a market capitalization point of view. Using data from the World Gold Council, the U.S. Geological Survey and the Silver Institute, Butler determined the history of "above ground" supplies of gold and silver over the past century to surprising effect.

Gold above ground amounts are easier to pinpoint than silver amounts, partly because gold is still held by world governments. Virtually none of it is ever destroyed by non-recoverable industrial consumption. Therefore, every ounce of gold that is mined annually is added to above ground total amounts. Some five billion ounces of the yellow metal are above ground, as of 2006, according to World Gold Council estimates.

Silver, however, is industrially consumed. According to Butler, more silver has been consumed in the past six decades than has been mined, even allowing for recycling. As of last year, the highest estimate for existing silver bullion equivalent (bullion plus "junk" coin) is one billion ounces, says Butler.

Butler's historical view of the gold/silver ratio looks like this:
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While the conventional gold/silver ratio comparison has changed comparatively little, the market cap ratio has increased 100- fold over the course of 106 years. This, Butler contends, makes the case for silver being grossly undervalued relative to gold nowadays.

Even more compelling is Butler's case stated on a per capita basis. Accounting for world population growth, there's a distinct disparity in metal availability:

"On a per capita dollar basis, the world's citizens have never owned more gold or less silver than they do today," says Butler.

Butler is quick to add that he's not saying that gold is overvalued or is set to head south. In fact,
says Butler, "the market cap of gold is most likely to continue to grow."

Still, the data leads The Silver Seeker to the certain conclusion that silver must, at some point, rise dramatically on both an absolute and relative basis versus gold.

Stay tuned.