(Corrects units to metric tonnes, from million metric tonnes, in paragraph 20; corrects location of the city of Kolkata, dealer's name in paragraph 2.)
* Gold price fall comes on big festival day
* Medallions see strong interest as holding value
* Jewellery purchases too small to be swayed
By Jo Winterbottom
NEW DELHI, May 6 (Reuters) - Indians, the world's biggest buyers of bullion, took gold's latest tumble as another incentive to buy on one of the country's most auspicious festivals on Friday.
"They started calling in from yesterday evening to lock in this buying opportunity. Even as I am speaking to you my three phones are ringing," said Harshad Ajmera, owner of JJ Gold House in the eastern city of Kolkata.
In the capital's luxury Ashok Hotel, customers queued to pay for medallions and jewellery with brown-paper wrapped wads of banknotes at a fair for Akshaya Tritiya, one of the busiest gold-buying festivals alongside Diwali and Dhanteras in autumn.
At the centre of a flower-festooned hall, women in glittering saris and men in western gear weighed up gold medallions at the busiest stall of the fair, organised by India's largest bullion importer, state-run MMTC.
"We're buying from an investment point of view and for the festival," said a housewife from Delhi, who was buying a gold medallion for the first time, and preferred to give just her surname, Mehra.
The medallions come slotted into a credit card sized plastic holder with the logo "A Mark of Purity" on the front and the weight of the gold stamped on the back, along with a hallmark.
Mehra, in a turquoise gold-embroidered sari, said jewellery tended to lose value on re-sale.
"When you return medallions, it's the same value," she said.
Last night's fall had already translated into price cuts on the floor, with a 20 gram gold medallion asking 47,375 rupees on Friday from 48,015 rupees on Thursday.
Gold spot prices on international markets have fallen over $100 in five days but had steadied on Friday to around $1,486.96 per ounce.
India's gold market is almost entirely fed by imports, which are expected to climb 64 percent to as much as 550 tonnes in 2011 with a normal monsoon forecast which may help farm incomes recover after a severe drought in 2009 slashed spending power.
"Those who will buy coins for investment may buy now, expecting a rebound in prices," said Kimti Lal Jain of Kailash Jewellery House in the capital. "But do not expect any major jump in jewellery sales."
Jewellery buyers were taking the price fall in their stride as the difference of daily price changes is lower given the smaller size of purchases.
"People here are not affected by the daily highs and lows. If you're buying bulk, maybe it's an issue, said a homemaker from Delhi at the MMTC fair, who gave only her surname, Sharma.
She had bought a pair of 22-carat gold bracelets with a simple geometric design as an investment.
She did not say how much she spent but a similar pair, weighing 26.31 grams, were on offer at 64,000 rupees ($1,429).
"Price spikes don't make any difference for jewellery. For raw gold, maybe people prefer to buy when the price goes down," said Love Kumar Sharma, senior manager with MMTC in Delhi.
Visitors to the fair were expected to more than double on Friday to about 50,000 people, with turnover forecast at 80 to 100 million rupees ($1.8 million to $2.2 million), from about thirty million rupees on Thursday.
Sanjay Anand, deputy general manager of MMTC, said around 40 percent of purchases would be jewellery with most of the rest in medallions and plain gold. About five percent would be silver. Cash purchases make up about 40 percent of turnover, with credit cards paying for the remainder.
The Bombay Bullion Association (BBA) said it expected total purchases on Akshaya Tritiya to be 20 metric tonnes, up from 15 metric tonnes last year.
The Bombay Stock Exchange and the National Stock Exchange extended trading hours for gold exchange-traded funds (ETFs) for the festival by five and a half hours.
"The fall is minuscule. And how much will you buy? You will buy only to the extent that your pocket allows. I am certainly not on a buying spree despite the fall," said Leena Singh, a homemaker from Delhi buying in the Karol Bagh market in preparation for the festival. ($1=44.777 rupees) (Additional reporting by Siddesh Mayenkar in MUMBAI and Mayank Bhardwaj in NEW DELHI; Editing by Ed Lane)