EVERY platinum miner at the Cape Town Mining Indaba probably has been asked the same question over the past three years: has the metal’s price bottomed? The enquirers are no doubt encouraged by what’s been the norm over the past eight years, of a very good January for the price of platinum.

It never rains in the first month of the year for the metal and it has not had a negative start to a calendar year since 2005 — that’s eight years of a positive start. Platinum, whose price has been under pressure over the past five years due to the global economic slowdown and oversupply problems, has gained more than 10% this year. Over the same period last year, it was up more than 16%.

For gold — the fear index — it’s a much more mixed bag in terms of early season performance. It’s weak this year, was strong last and in negative territory in 2011.

Gold and platinum receipts make up a significant chunk of South Africa’s export earnings.

So with that in mind, should the rally in platinum really excite? Supportive factors are the production problems South African miners face, such as heightened strike activity and worker fatalities.

An ever-growing consensus out there is that the market is expected to be in deficit this year. This deficit will be dependent on the level of interest of investors via exchange-traded funds (ETFs) and not the actual European or US car sales performance this year and other physical demands for the metal, in jewellery, for example.

In terms of the physical supply and demand, Absa Asset Management resources analyst Stephen Arthur expects a "tiny surplus" in platinum this year, which would keep prices under pressure.

Europe’s vehicle market is the source of the greatest demand for platinum. The "outlook for platinum demand depends on car sales in Europe, as it’s used mainly in diesel.... We don’t see massive increases in sales this year," Mr Arthur said.

Johnson Matthey, the UK-based manufacturer of catalytic converters for cars, reported a third-quarter fall in profit last week. The company saw no upturn in Europe and Japan for its wares this year.

Catalytic converter production requires palladium or platinum.

If ETFs were to be removed entirely from the market, platinum will be in a surplus situation and even worse if they decide to sell. ETFs are investment funds traded on exchanges that hold assets such as stocks, commodities and bonds.

But if the story of an economic recovery is sustained in global markets and investors start to buy more of the metal, the market could find itself in a deficit position, meaning the rally we are seeing can be sustained into the rest of the year.

If consumers are going to want platinum, once the market moves into deficit, they are going to have to pay a significantly high rand/ platinum price to get producers to expand production once again, Mr Arthur says. All of this will be determined by what investors perceive over the next two to three years on growth.

THE fact that Europe’s recovery remains in large part in the hands of politicians, is the very reason why I haven’t got carried away with the idea that the region has all but solved its sovereign debt crisis or even has a handle on it.

Let’s take Spain. Its prime minister, Mariano Rajoy, has successfully managed to navigate through some rather choppy waters with the help of the European Central Bank’s pledge to buy the bonds of struggling eurozone members.

Support from the bank has helped to ease borrowing costs and cooled talk of the fourth-biggest economy becoming another bail-out recipient.

The actions of Mr Rajoy and the European Central Bank have been integral in easing tensions in Spain and by extension the common monetary union. But that tag team is now under threat from political scandal. Officials in Spain’s ruling People’s Party, including Mr Rajoy, have been hit with allegations that they received cash payments from a slush fund. The allegations have led to calls for the prime minister to resign and protesters have taken to the streets.

Spanish bond yields have started to increase again on the threat to Mr Rajoy’s leadership, climbing to their highest this year as the scandal threatens a man that markets have come to trust. It hasn’t helped that Italy’s Silvio Berlusconi is surging ahead in opinion polls.

There’s no escaping uncertainty as long as Europe and the common monetary union’s future lies with politics. Sustainable economic growth is the best vessel to get those governments out of the mess.

Confidence has to translate into growth very soon.