Analysts fear the art market bubble may have finally burst after shares in Sotheby's auction house dipped by almost a third and major paintings including one of Vincent Van Gogh's final works failed to sell.
The auction slump follows recent turmoil in America's credit markets which may have affected the demand for fine art.
At an auction in New York this week, Sotheby's failed to sell 20 of the 76 lots on offer, including Van Gogh's Wheat Fields, which was painted just days before the artist's suicide in 1890 and had an estimated price tag of just under £17m.
Of the Impressionist and modern art lots it managed to sell, all went under the hammer for well below expectations. Sotheby's, the world's second largest art seller, generated total sales of £129m, far short of the lower end of its pre-sale estimates of £170m to £260m.
Sotheby's shares which are traded on Wall Street, fell $16.05 to $34.02, dipping to one of its lowest levels this year. Some suggested this could be the first sign of an end to the "golden age" of contemporary art sales which in recent years have fetched record highs and all eyes are now on crucial sales at Sotheby's and Christie's in New York next week.
Over the past decade, City investors and hedge funds had become increasingly interested in acquiring modern art, but some may now be nervous after massive losses incurred by America's biggest banks relating to the sub-prime mortgage crisis.
In the Sotheby's auction this week, the Van Gogh landscape was eventually withdrawn after sluggish bidding reached just £12m.
Sotheby's now owns the painting, because it had guaranteed the seller a minimum price, said to be around £15m.
A Picasso painting also failed to sell, and a George Braque work was withdrawn after failing to fetch its minimum estimate price. The auctioneer sold Gauguin's Te Poipoi (The Morning) but secured under £18m for the painting, which was short of its low-end estimate of £19.1m.
Speaking after the sale, David Norman, Sotheby's chairman of Impressionist and modern art, denied this signified a correction in the market and put the failure of works to sell down to high estimates set for some works. " I'm not ready to read this at all as a correction to the market, which I think, despite [this sale], is strong. I see it more as resistance to the aggressive estimates and not so much that the market has turned," he said.
But Dana Cohen, an analyst at Bank of America, said the disappointing sales suggested that problems in the credit and mortgage markets were spilling over into the broader economy.
Charles Dupplin, chairman of the art division at Hiscox, which is Europe's largest insurer of fine art, warned earlier this week that the unprecedented boom in the market could come to an end in the light of growing financial instability. "November's sales may hit choppy water. There could be an art market correction. On the whole, there must at least be a flattening off, " he said.
Works that failed to reach their reserve
* Wheat Fields, Vincent Van Gogh
Estimated to fetch £13.3m-£16.7m
* Head of David Landau, Frank Auerbach
Estimated price at auction £500,000 to £700,000
* Adenosine, Damien Hirst
Estimated to fetch between £1.8m and £2.5m at auction
* L'Echo, Georges Braque
Estimated at £7.1m-£9.5m.
* La Lampe, Pablo Picasso
Estimated to fetch £11.9m- £16.7mReuse content