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Banking Crisis in Europe, Polish Interest Rates and Rare Precious Metals

Listeners’ Questions, Peter’s Answers – September 15, 2011

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Douglas from Boulder, CO
Could you please discuss how the banking crisis in Europe affects U.S. banks, the American Economy, and gold prices?

Michael from Lodz, Poland
I’ve purchased an apartment with little down payment. I live in Poland but the credit is denominated in dollars. Due to the low Libor rate, the actual interest rate is around 4%. Is it possible that when the dollar keeps losing value, and interest rates in the U.S. rise, the dollar will also gain? So that both interest rates and the value of the dollar rise simultaneously? My strategy is based on the assumption that it’s good to borrow money that’s depreciating, and it’s worked so far. But if what I described happens, I will lose on both grounds, correct?

Grant from Towson, MD
Given that platinum and rhodium are rarer than gold, how can gold sustain a price that is approximately equal to the prices of platinum and rhodium? Is the current price of gold purely a result of the Euro crisis/ U.S. downgrade? Are platinum and rhodium simply lagging behind gold because of these crises and will soon catch up? If not, isn’t that a sign of a bubble in gold?