What Art Investors can Learn from Gold Investors Part 2 – artmarketblog.com

What Art Investors can Learn from Gold Investors Part 2 – artmarketblog.com

Lady Writing a Letter with Her Maid by Vermeer

All one has to do is look at the jewellery people are wearing to realise that gold is considered by most people to be a substance of great beauty.  Since gold has very few uses other than as a material for making jewellery and other precious objects, were gold not physically attractive, it would not be anywhere near as desirable as it is.   It is because so many people find gold desirable and attractive that there is such high demand for gold.  If only a small percentage of the population were to find gold attractive and desirable then demand would be much lower. However, it is not just the fact that gold is physically attractive to human beings that makes it an excellent investment and a highly valuable substance.  As I have shown, the desirability of gold can be linked to three main factors:  physical beauty, mass appeal and rarity.  Without any one of these three factors, gold would not be anywhere near as valuable as it is, so it is these three factors that I want to explore in relation to art investment.

Gold is a finite resource which means that only a limited amount of gold exists on the earth.  At some stage in the future all the gold that remains in the earth’s crust will be extracted by mining companies and that will be that.  Gold cannot be artificially produced so only a certain amount of gold will ever exist.  When it comes to fine art, rarity is a factor that comes into play on a regular basis, and is extremely important to consider when approaching art as an investment.  Original works of art are pretty much always one offs and therefore rare in their own right, so it is important for art investors to look at the bigger picture.  Let me explain.  Just like gold, the work of a deceased artist is finite resource, whereas a contemporary artist who is still alive could go on to produce any number of subsequent works of art.  A good example of an artist with a small oeuvre is Vermeer whose oeuvre consists of an extremely small number of works; thirty seven paintings are known to have been definitely painted by Vermeer with a further 13 or so attributed to his hand.  Because there are so few works by Vermeer in existence there is huge demand for his work which usually sells for tens of millions of dollars.  Rarity can also apply to the number of works on the market as opposed to just the number of works an artist produced.  The work of artists whose work is in high demand from public museums and galleries will often fetch higher prices when their works to come on the market because so many of their works are owned by galleries and museums, which leaves less works for private collectors and investors to purchase.

Art investors who want a safer long term investment as a hedge against more speculative investments should therefore be purchasing the work of deceased artists who produced as small a body of work as possible.  When it comes to art investment I firmly believe that art investment should not be a short term speculative investment, as some people believe it should, and should only be approached as a long term hedge against speculative investment markets such as the share market.

Stay tuned for part 3………

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications

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9 Responses

  1. I see what you are saying about the quality of gold and relating that to art. Yes, original cannot be reproduced (unless of course it is stolen and replicated), but speaking as a digital artist, I don’t know where I stand with this for the simple fact, before I can transfer my work to canvas, I have to print out my digital art. Is it not original because I didn’t create the art with my hand? I don’t know, but I sign all of my art. Original art have been known to sell for billions of dollars. Maybe one day digital art will be as valued as traditional art =) I just followed you on twitter, make sure to follow me too;)
    ——————————–
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    Airee Williams

  2. “When it comes to art investment I firmly believe that art investment should not be a short term speculative investment, as some people believe it should, and should only be approached as a long term hedge against speculative investment markets such as the share market.”

    That depends on the expertise and the social leverage of the buyer. I’d say that Old Masters, or brand moderns are safer bets: and rarity in any market adds value, but if you’re up for a good gamble and have a great eye and love to play the art game, you can win pretty big with emerging artists. ANd, if you’re a reknowned collector with a name behind you and, perhaps, an already noted collection, then you can MAKE a purchase into an investment with a little bit of press.

  3. I was aware that the volatile financial markets could have a strongly negative effect on the international art markets based on modern artists and their art. It only figures that the speculative contemporary art market would be the most affected. I agree that contemporary art and the artist’s career depend on cultural and economic cues. I wasn’t surprised that the old masters works are recession proof to a point. Buyers of contemporary art by living artists may not get the same bang for their buck because living artists usually don’t have a proven following. They sell and show where they can. The risk factor for buying unproven contemporary art is glaringly real. On the other hand the dead old masters already have established their art legacy . None the less, I feel that art by any artist makes a strong comment on the whims of the buying public. Not all art is museum quality or collectible. What’s happened to the buyer who gave a leg up to the struggling artist of the past? I’m sure when Warhol worked in a department store art dept. his work wasn’t considered collectible. The old masters do seem to be as solid an investment as gold, but then even fools’ gold sparkles in the sunlight.

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