PRECIOUS-Gold falls in line with stocks after Fed stimulus

* Post-Fed bounce short-lived as markets slide on 'cliff' fears

Link to unemployment prompts fears over limits to stimulus

* Some physical gold buying interest emerges below $1,700/oz

* Coming up: U.S. retail sales, Nov; 1330 GMT

(Changes trade comment, byline; updates prices; pvs SINGAPORE)

By David Brough

LONDON, Dec 13 (Reuters) - Gold prices fell more than 1 percent in Europe on Thursday, failing to sustain gains made after the Federal Reserve unveiled a fresh round of bond purchases, as investors switched their focus to the prospect of an approaching U.S. fiscal crisis.

The precious metal hit a two-week high late on Wednesday after the Fed said it plans to buy $45 billion in longer-term Treasuries each month on top of the $40 billion monthly purchase of mortgage-backed securities it announced in September.

But Fed chairman Ben Bernanke also warned that monetary policy would not be enough to offset the damage to growth if talks to close the fiscal deficit in Washington failed, triggering mandatory tax increases and spending cuts.

Gold quickly dropped in line with other markets as the new stimulus measures were overshadowed by concerns that budget talks might fail to head off what would be a crushing blow to growth. Traders cashed in gains ahead of the year-end, with the statement containing few surprises to justify a stronger rise.

Spot gold was down 1.2 percent at $1,691.50 an ounce at 1152 GMT, while U.S. gold futures for December delivery were down 1.4 percent at $1,693.30.

The Fed's decision to explicitly link easing with unemployment also raised some concerns that future economic stimulus could be limited.

"A difference between previous rounds of QE, and the latest monetary stimulus announcement, is that U.S. unemployment was rising or flat before, but has been falling lately," Mitsubishi analyst Matthew Turner said.

"One could extrapolate that the threshold set by the Fed could be reached by 2014. However, the Fed said this was only a guidepost to when it would consider raising rates, and of course unemployment trends could slow or even reverse again."

Last month the U.S. unemployment rate dropped to a near four-year low of 7.7 percent, although the better number was the result of a lower number of job-seekers.

LOCKING IN PROFITS

Gold benefits from easy monetary policy as it keeps up pressure on longer term interest rates, fans fears over inflation, and can undermine confidence in paper currencies. The precious metal has risen nearly 9 percent so far this year.

"The temptation to lock-in profits as we near year-end was strong, and gold sold off," said UBS in a note. "But despite the decline... we don't think the sentiment towards gold has actually turned negative."

"There is hardly any follow-through selling interest in early European hours, and we would expect market participants to hesitate chasing the market lower after the Fed has essentially just doubled the pace of money-printing."

Gold is likely to remain rangebound, as many investors are closing books for the year, while the difficult U.S. budget talks keep them away from big bets.

The negotiations could drag on past Christmas given sharp differences between congressional Republicans and the White House on how to avert steep tax hikes and budget cuts.

Dealers anticipated physical buying interest in gold would kick in below the psychological $1,700 per ounce. Buying in India increased on Thursday as local prices hit a one-week low.

"Volumes are good as (the) rupee has appreciated, and gold is facing correction after (the) FOMC," one dealer with a Mumbai-based private bank importing bullion, said. India is vying with China this year as the world's biggest gold market.

Among other precious metals, silver was down 2.3 percent at $32.68 an ounce, while spot platinum was down 1.4 percent at $1,610.50 an ounce. Spot palladium was down 2.1 percent at $677.72 an ounce.

Palladium, which has outperformed other precious metals this month after lagging for much of the year, hit a one-week low at $676.60 an ounce in earlier trade.

(Additional reporting by Rujun Shen in Singapore; Editing by Jan Harvey and Mike Nesbit)