Austrian artist Franz West's "Gekroese" (2011) - Austrian German for "bowel" - is his biggest piece to date and sold on the first day of the fair for a seven-figure sum, according to Jona Lueddeckens from the Gagosian Gallery.

Other exhibitors at the 43rd edition of Art Basel, described in a Swiss daily by artist and activist Almut Rembges as "an art flea market for the rich," are hoping investor appetite for art will be just as huge despite the deepening euro zone crisis.

Over 300 galleries, whittled down from some 1,000 applicants, are showing more than 2,500 works, including paintings, sculpture, drawings, video installations, photographs and performance art.

"If the work is good people are willing to pay for it," Lueddeckens said. "People are not willing to pay high prices for mediocre works."

Hungry bidders have driven up prices for modern and contemporary art well beyond their estimates this year, with sales of blue-chip works smashing records at auction.

Buyers from the Middle East, notably Qatar, have fuelled demand as they stock up on works to fill museums due to open in the region in the coming years.

This helped push up the value of the art market to an estimated 46.1 billion euros in 2011, according to a report commissioned by the European Fine Art Foundation, up 63 percent from 2009 when value slumped as a result of the financial crisis.

But the pace of growth slowed sharply in 2011 from the previous year and industry insiders warn of signs that the market may be cooling.

"The mood is not negative and not positive but somewhere in the middle for now," said Anders Petterson, managing director of market research firm ArtTactic.

"A-GRADE ART"

Philip Hoffman, chief executive of the Fine Art Fund Group, which has assets under management of around $120 million, believes collectors are most likely to splash cash on rare works this year, adding that those valued under $100,000 might struggle to find homes.

"It's a matter of pricing. If it's a good piece and it's sexy and appeals, it's going to sell very fast," he said.

Art lovers and dealers - some dressed in outfits more exuberant than the pieces on display - took photos on smartphones, scribbled notes in the margins of programmes and networked with fellow visitors in a cacophony of languages.

Buyers crowded into the Gagosian Gallery booth to peer at Van Gogh's 1884 work "Two Rats" priced in seven figures, as well as pieces by Giacometti, Jeff Koons and Richard Phillips. The gallery, founded by influential U.S. art dealer Larry Gagosian, does not label its lots because it frequently has to rehang.

Alongside the top names, Petterson expected investors to show interest in younger artists where prices tend to be lower, but sees weaker demand for middle-of-the-range works.

All five works by 29-year-old Nigerian artist Njideka Akunyili ranging from $4,500 to $17,000 were sold in the first hour of the show, said Connie Rogers Tilton from the Tilton Gallery in New York.

"The mood is great. The opening was really lively," she said.

FLIGHT TO ART?

Last year the fair drew around 65,000 visitors to the medieval Swiss town, which also lends its name to the set of financial regulations on bank capital. Organisers expect a similar number to come through the doors this year.

Hoffman, whose fund invests in pieces costing more than one million pounds, said super-wealthy clients saw art as a safe-haven against a backdrop of uncertainty in the euro zone.

"Some are trying to get the money into art and out of their respective countries because of worries about currency risk and governmental risk," he said.

Despite qualms over the direction of the world economy, gallery owners seemed unperturbed.

"If you're selling art like Warhol, it's even easier to sell if there's a crisis because people are looking for new ways to invest," said Nicole Gnesa from the Blau Gallery, exhibiting Warhol drawings from the 1950s.

This view was echoed by Richard Nagy who was selling works by artists such as Joan Miro, Gustav Klimt and Egon Schiele, priced up to 1.5 million pounds.

"You can understand people wanting to park their money in something that's a bit more solid," he said.

Art Basel is open to the public between June 14-17. Even those with less deep pockets can enjoy a stroll through the aisles to catch a glimpse of a rare Modigliani, delicate Picasso pencil sketches and a pink-faced Mao by Warhol.

"The show is just as much a meeting place for everyone in the art world as well as a market place," said Art Basel curator Marc Spiegler.

(Reporting by Caroline Copley, editing by Paul Casciato)

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