LONDON -- Could art make for a sounder investment than brick and mortar in times of gloom?

An unprecedented auction of new works on Sept. 15 and 16 by the world's most expensive living artist, Damien Hirst, could shed some light on the question.

The two-day sale, organized by London auction-house Sotheby's, marks the first big test of endurance for the Hirst brand since the artist sold a diamond encrusted skull for $100 million last year. Entitled 'Beautiful Inside My Head Forever,' the auction will feature 223 new works, including several of the pickled animals in glass tanks, butterfly paintings and medicine cabinets that have propelled Hirst to worldwide fame.

Beyond gauging the artist's long-term appeal, however, the sale will also take the pulse of the contemporary art market at a time when the credit crunch and spreading economic slowdown threaten to diminish collectors' appetites.

"Best case, the sale does extraordinary, and confirms the continued appeal and strength of the Hirst brand. Worst case, it performs below expectations, and could signal a wider contemporary art market decline," said Anders Petterson, the founder of market research firm ArtTactic and author of a recent report on the auction.

The sale is expected to fetch at least $120 million, but a report in the Art Newspaper claiming that Hirst's dealer, the White Cube gallery, is sitting on more than 200 unsold works, recently sparked speculation it may disappoint. The gallery has publicly denied holding a "mountain" of works.

"The appetite for Damien's art is such that we never have enough and I'm always keen to have as much work on consignment as possible," White Cube gallery owner Jay Jopling said in a statement.

Hirst's gamble is a big one. If unsuccessful, it could take a serious toll on the art market. But Petterson seemed confident that wouldn't happen.

"The sentiment among market insiders is that there is just too much vested interest and money at stake to let it fail," he said.

Hirst, dressed in a black T-shirt and dinner jacket and wearing shaded lenses, showed not the slightest sign of concern at a pre-auction event in London earlier this week. He posed at length for a shoving throng of photographers, first arms crossed -- leaning on a white marble statue of an angel -- and then seated next to a pickled zebra, an ironic smirk only breaking through his polished poker face at the 37th "Damien" shout for his attention.

Despite the rock-star treatment, the man who recently appeared at no.31 in Vanity Fair's list of influential people -- ahead of Oprah Winfrey -- is far too clever to admit to being in it for the money. He concedes, however, that the cash doesn't hurt.

"Cash is a good thing. It makes people take you seriously, but it's not the primary motivation for doing this," he said.

"You've got to make sure it's the money that chases the art and not the art that chases the money," he added.

And his strategy seems to be working. Since October 2004, the Hirst market has seen an average increase in average prices of 207%, or a 39% annual compound return, according to ArtTactic research.

Meanwhile Oliver Barker, senior international specialist for the auction house, brushed off concerns about the health of wider the market, stressing that a contemporary art sale Sotheby's hosted over the summer was its most successful ever.

"Unlike equity, paintings are things you can actually enjoy and hang on your walls. Sometimes at times of financial crisis it's actually quite nice to run to things that are actually tangible and art fulfills that," he said in an interview.

Cutting out the middleman?

The sale is expected to make Hirst a bundle, but the event has been the buzz of the art world this fall for another reason: it could mark a pivotal point in the way the market operates.

With this direct sale to the public, Hirst is cutting out the middleman -- the galleries that usually take roughly 40% of a piece's price tag -- and potentially rewriting the rules of how the art world does business. Until now any work under two years old was understood to be the preserve of galleries.

Hirst, however, denied setting out to change the rules of the game.

"[In] the end it's just another option for us, which can't be bad. The galleries will adapt quickly to the change, as they always have," he said.

Besides, he intends to plug the proceeds of the sale right back into the art market.

"I can spend all that money on a Francis Bacon," he said.

Copyright © 2008 MarketWatch, Inc.