“Except for gold, all other assets are just bubbles”, burned Chinese investor says

With equity prices on the Shanghai stock market down about 40% since June 2014 and falling into bear territory last week, Chinese investors are renewing their love affair with gold.

In addition to its plummeting stock market, China is now on course to grow at its slowest pace since 1990. And with China devaluing the currency in an attempt to boost exports and reverse its downturn, money is flowing into perceived safe-haven assets such as domestic bonds, gold and the dollar, Reuters confirmed.

Faith in stocks fading: The news agency published some disturbing quotes from Chinese investors who have been snake-bitten by the startling decline in stock prices. I just have a small amount of money in the stock market. I had planned to sell when indexes got a little bit higher, but soon it dropped to this situation, said a 22-year-old investor in Guangdong named Zhou Junan. I dont have faith in the stock market any more.

Another unidentified investor in Beijing added, Except for gold, all other assets are just bubbles to me. I guess I am a pessimist. If there are really some global conflicts, even dollars and bonds could not buy a meal.

We notice a rise in gold investment whenever theres concern over yuan depreciation, said Richard Xu, the manager of Chinas biggest gold ETF. Buying gold also helps investors avoid risks in equities. It serves double purposes.

Increase in gold buying for new year: In addition to concerns about the bearish stock market and the weakening yuan, Chinese citizens also are buying in anticipation of the upcoming Lunar New Year holiday on Feb. 8.

With the spring festival approaching, there is some increase in demand as people are buying gifts. We expect the demand to pick up toward the end of the month as the spring festival is in early February, Shandong Gold Group analyst Shu Jiang told Reuters.

In the meantime, Chinas financial sector continues to take steps to boost the nations gold trade. Via the Shanghai Gold Exchange and the China Foreign Exchange Trading System, China has launched interbank gold trading at the beginning of this year, in an effort to open up the countrys bullion market, CCTV noted. At least 10 banks will be involved at the first-tier level, including the Australia and New Zealand Banking Group.

Before the new mechanism, banks were not allowed to trade gold with each other and could only buy the precious metal through the Shanghai Gold Exchange, CCTV added.

Whether Chinas economic crisis has the power to take down the rest of the globe with it is up for debate. But nowhere else on the planet right now is the need for gold so crucial than in China, home to an unbelievable bubble of stocks juiced up on massive debt.