Japanese households stayed put in gold during the market turmoil this month, in sharp contrast to a selling rush when prices surged in August, reflecting gradually spreading recognition of gold as an investment asset.

When gold prices surged in August, Japanese retails rushed to sell their gold jewellery and ingots for a hefty cash boost.

Japanese have traditionally treated gold as an asset they hold long-term and did not associate it much with risk aversion.

But their constant buying amid a global selling glut shows bullion may finally be seen as an important asset to be included in their portfolio when most other popular assets such as stocks and currencies are battered.

There is a gradual shift of money into gold and that trend is spreading, said Wakako Harada, a senior coordinator at Tanaka Kikinzoku Kogyo, Japan's largest bullion house.

Some people may have started buying when prices were already high, but people who want to protect their assets over the longer term are seeing gold as a hedge against financial crises, she said.

In August, the amount of gold for investment purposes that the house bought back from customers more than doubled to 10.2 tonnes from 4.3 tonnes in July, while the amount Tanaka sold was relatively steady at 3 tonnes. Tanaka didn't disclose the breakdowns for September.

As prices fell, the number of people who come to buy gold has stayed steady while those who are selling their gold holdings have declined, Harada said.

Spot gold lost nearly $400 or 20 percent from its historic highs hit earlier this month in the sell-off this week. While the market was volatile, inflows into the world's largest gold-backed exchange-traded fund, SPDR Gold Trust , were steady. A similar trend has emerged in Japan.

The assets of Mitsubishi UFJ Trust and Banking Corp's physical gold ETF, Japan's first backed by metal stored in the country, stood at 22.4 billion yen as of Sept. 27, down just a tad from, 23 billion yen as of Aug. 31 and also recovering from 21.4 billion yen during a sell-off from late last week to early this week. Its size grew to 5.54 million units as of Sept. 27 from 5.12 million as of Aug. 31, indicating steady fund inflows.

Compared to the drastic movements in gold prices, trading in our ETFs has been quite calm, with slightly stronger buying pressure than selling, said Osamu Hoshi, deputy general manager at Mitsubishi UFJ Trust.

People who wanted to start buying ETFs but refrained because of high prices took this market plunge as a good bargain opportunity. Because the Japanese investor base for gold ETFs is still limited, there is still much scope for new money to flow into such ETFs, he said.

The highest retail price at Tanaka Kikinzoku Kogyo so far this month was 4,721 yen per gram, below the August high of 4,745 yen per gram, excluding the 5 percent consumption tax, which was the highest since September 1980. Retail gold peaked in January 1980 at 6,495 yen.

The high retail price was the main reason spurring retails to cash in on their gold holdings last month, and most of the people who wanted to sell appear to have done so, limiting sellers this month, industry officials said.

In a way, Japanese played very smartly last month, selling as prices were rising, said Akira Doi, a vice president at commodity brokerage Daiichi Commodities Co.

Those who didn't sell are not in a rush to sell as they expect prices to rise again, while those who saw prices rise close to 5,000 yen find levels below 4,000 yen as affordable.

Japanese buying patterns are changing. Their action is indicative of the fact that gold is seen more as an investment class by Japanese, as their investments in stocks and foreign currencies assets are hit, Doi said.