After seeing a steady decline in net long positions for the last 10 weeks, large speculators finally reversed course and added silver contracts in the most recent Commitment of Traders (COT) report.

From February 5 through April 9, the group saw its holdings drop from approximately 38,000 contracts to just under 8,000 contracts being held long. And if we look further out, the group was net long over 40,000 contracts in early December.

The report from April 16 shows that large speculators are long 17,598 contracts — over twice as many contracts as the previous COT report.

The last time we saw a similar pattern in the COT reports was last spring and summer. Large speculators in silver lightened up on their holdings for several months, and then at the end of July they increased their holdings from around 8,000 contracts to approximately 15,000 contracts in one week.

This development came as silver was trading right around $27 per ounce.

From Aug. 2 through the end of September, silver rallied to over $35 an ounce. This is a 30 percent rally in just under two months.

I would also like to point out that based on the 10-week Relative Strength Index, silver is the most oversold it has been in 20 years.

I look for silver to rally over the coming months and we could see a similar rally to what we saw last summer.