The Art Market Confidence Indicator (AMCI), launched by Artprice in 2008 has over the two years become quite a reliable indicator of the health of the art-market. And AMCI has conclusively established how the art market, always considered to be an investment option for the risk taker, is somehow intrinsically related to the state of global economy.

AMCI is basically a price and sentiment indicator. It is therefore natural that a study of the AMCI would only give an impression of the trends prevailing in the market. For example, when the AMCI started off in early 2008, art prices were particularly high. In just one year (2007-2008), the market's overall price index had posted a 29% increase! But it was not to last, and by the end of 2008, as the global financial system tethered on a precipice, the art price index had contracted by 30.7% (1 January 2008 - 1 January 2009). On 31 January 2009, the AMCI dropped to below -20 points. During the first quarter of 2009 the art market's overall price index contracted a further 10% while the S&P 500 continued its meltdown to reach its lowest level of the decade.

However, as is the case with most indicators, it fails to reflect the story behind the drop in prices. One of the reasons why the art market suffered during 2009, was because of the chance that international auction houses in conjunction with galleries and private collectors took in estimating artworks. In a bullish 2008, it wasn't a problem, since prospective buyers had the money to invest even in overpriced works. As a well known artist, who does not want to be named described the phenomenon, “Even relatively unknown painters and sculptors from India, were going at ten times their actual pricing. All you needed then was a solid patron, who would stock your work, and then liason with auction houses to put your painting under the hammer.” The process did not stop at this. Actually, the price of an artpiece is determined through competitive bidding, and here too, the patronbe it a gallery, an institution, or a private collectorplays a major role, strategically outbidding an artpiece, until it's reached its money's worth.

For well known artists, this could reach the galaxies.

It was this trend of overpricing at estimate level and then influencing the bidding process that affected the post depression art market most negatively. And as the world economy slowly recovered during 2010, a stock phrase among all spokespersons after successful auctions was 'rational estimates'. The phrase is new, but important. It establishes in context that at some point of time, these same auction authorities were responsible for exactly the opposite 'irrational' estimates.

So with such 'rationality', what does the art market indicate in the end of July 2010? According to AMCI surveys, even the depressing market scenario gave art-mandarins hopebuying opportunities. At the beginning of the summer of 2009, the bought-in rate fell below 40% for the first time in the year. By the end of the summer, the art market finally began to post growth figures after five consecutive quarters of contraction, and the art price index rose nearly 5% during the second half of 2009.

The ground was set for historic auctions to be prepared, and on the evening of February 3, Sotheby's in London announced a new record: the world's best ever art auction result (in dollars) for Alberto Giacometti's Walking Man I which fetched £58 million versus a pre-sale estimate of £12 18 million. Auction revenues also began to rise in the contemporary art segment and the AMCI climbed briskly to above 30 points (the revenue from London's contemporary art sales in February 2010 rose 255% vs. the previous year's totals).

After a first quarter brimming with new records, 74% of the art market's respondent expressed confidence regarding the economic context, while stock markets around the world posted excellent performances in April and the AMCI reached its high point of the year so far, at 35 points.

At the start of May in New York, Pablo Picasso overshot the Giacometti record with his painting Nude, Green Leaves and Bust which fetched $95m at Christie's. Encouraged by this new demand for the world's most prestigious works of art, the rest of the market began to emancipate itself from economic indicators, convinced that the price increases observed in the ultra-prestige segment could be extended to the rest of the market.

The bad performances of stock market indices at the end of May thus did not have any impact on the morale of buyers, especially of Asian origin!

'Rational' estimates were finally showing their results. And it was established that the art market may not actually depend on the global stock market, as far as price-manipulations were restricted to 'rationalities'.