LONDON (Commodity Online): Gold to keep outperforming the other precious metals (mainly Silver and PGMs) this year, yet also suggests the yellow metal faces some near-term downside risk should the unstable outlook in Europe lead to more strength in the U.S. Dollar, said Deutsche Bank, the largest bank in Germany, in a weekly commodities report.

“However, the significant liquidation in speculative length is providing a more supportive positioning environment for the sector, in our view,” the German bank added.

Frankfurt based bank continued that, the reduction in net length by speculators may be drawing to a close as the speculative community moves toward its lowest speculative net length since the collapse of Lehman Brothers in 2008.

Analyst with Deutsche Bank stated that, “History would suggest that it is only when U.S. real interest rates turn positive and the U.S. dollar is appreciating that the speculative community is likely to adopt a short gold position.”

“Indeed the last time the speculative community held a net-short position in gold was 10 years ago. Given our view that U.S. real interest rates will remain negative and that trends in the U.S. basic balance imply that any rallies in the U.S. dollar are based on shaky foundations, we expect the process of scaling back gold length may be drawing to close,” they concluded.

Deutsche Bank has a large presence in Europe, the Americas, Asia-Pacific and the emerging markets. In 2009, it was the largest foreign exchange dealer in the world with a market share of 21 percent.