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Global economic growth continued to soften as the first half of 2016 came to a close, leading to global central banks continuing with their extremely accommodative monetary policies. Following the surprise Brexit vote to leave the European Union by Britain, additional stimulus was deemed necessary and with even more cash being produced at the economic centre, interest rates declined to historic lows. As much as a third of global bonds now trade at negative interest rates. In such a world real commodities become very valuable as investors turn to them as a store of value as opposed to financial assets denominated in depreciating currencies. Gold is already up more than 25% in US dollar terms during 2016, underlining this theme of real assets being preferred over paper assets. This demand for real assets is bound to benefit high-quality art as well, albeit with some time lag. Unfortunately only the top-end, trusted names will benefit from this search-for-safety.


Our panel of auction houses had 17 auctions in total during the first half of 2016, down slightly from the 18 auctions held during the same period of 2015. In all 2 340 (2 500) lots were sold at a total value of R118.9 million (2015: R132.3 million). Volumes/Number of lots sold declined by 14% against first half 2015 and total turnover value declined by a massive 21%. The average price per piece of R50 800 (2015: R53 300) also declined by 4.8% during the first half of 2016. This metric has held up best among all the data series, providing a general sense of well-being for the overall South African art market. The maximum price paid during the first half of 2016 was, once again, for an Irma Stern, this time for ‘Portrait of Freda Feldman in Basuto Hat’. The R4.5 million hammer price was drastically lower than the R14 million best price of 2015. The next-best prices of R4.3 million and R3 million were also drastically lower than during the previous half-year period.


The CAPI100 was down 0.1% during the first six months of 2016. It is interesting to note that the smaller the universe and the closer to the ‘top’, CAPI50 and CAPI20 showed stronger results than the wider CAPI100. During tough times, investors tend to go with what they know, the old faithfuls as it were, and hence the better performance of the top-selling artists. For as long as the oil medium is under pressure, the overall index will also remain under pressure. The oil sub-index is still 14% below the peak it reached during the first quarter of 2015.

   CAPI 100 CAPI 50 CAPI 20 CAPI OIL CAPI Watercolour CAPI Drawing CAPI Sculpture CAPI Print/woodcut CAPI Mixed media
Half-year 2016 -0.1% +3.4% +5.6% -1.1% +9.3% -0.3% -3.4% +9.6% -3.7%


The global art market has been under pressure this year due to several factors, but the Chinese slowdown of luxury spending has been one of the biggest reasons. A clampdown on corruption and gifting has sent shock waves through the entire luxury industry and the art market certainly hasn’t been spared. Fortunately gold is attracting a great deal of real investor interest due to negative interest rates in many global bond markets. The graph below shows that gold is now the top-performing US dollar-based asset among those shown here, since the year 2000. Quality art will benefit as works by Francis Bacon, Andy Warhol and Dave Koontz become assets deemed as good-as-gold in storing value through difficult times. This is a unique example of where one’s negative is another’s positive.


Kindly note that this article does not constitute financial advice. All information and opinions provided are of a general nature and are not intended to address the circumstances of any individual.

Written by Citadel Head of South African Portfolios, George Herman

August 2016