Japan institutionals' interest in gold rising

TOKYO, Oct 3 (Reuters) Japanese institutional investors are showing increased interest in gold, as volatile financial markets since the Lehman crisis have spurred them to rethink their asset allocation, the World Gold Council's top Japan official said.

Recent sharp swings in the gold price , which surged to a record high above $1,900 an ounce in early September but then fell nearly $400 over the next three weeks, should not undermine the value of the metal in an investment portfolio, Takahiro Morita told Reuters in an interview.

"The purpose of investing in gold is for its effectiveness in diversification and against various risks, and so over the long span it is very effective to invest regardless of the price level," said Morita, who became director of the World Gold Council's Japan office on Oct. 1.

"The nature specific to gold that it moves differently from other asset types and does not carry credit risk won't necessarily change in the future. There are no reasons to believe that these features would be lost in the future."

A downgrade in the U.S. sovereign debt rating amid a deteriorating outlook for the world's largest economy, as well as deepening concerns that the spreading European debt crisis could drag on the global economy, triggered the latest rush to buy gold

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