PRECIOUS-Gold slips as focus on new budget talks lifts dollar

* U.S. budget battles loom after "fiscal cliff" deal

* Potential duty hike set to hurt Indian gold demand

* Turkish gold imports rose 57 pct in 2012

LONDON, Jan 3 (Reuters) - Gold fell from the prior session's two-week peak on Thursday as the dollar strengthened and a stock market rally stalled, with investors focusing on coming U.S. budget talks as euphoria over a vote to avert a fiscal crisis faded.

World shares struggled for traction on Thursday as investors grew concerned about new political battles looming in Washington over spending cuts, following Wednesday's rally on the back of a deal to avoid the so-called "fiscal cliff".

Spot gold was at $1,678.46 by 1446 GMT, down 0.48 percent after having touched a two-week peak above $1,694 in the previous session. U.S. gold futures for December delivery were down $9.80 an ounce at $1,679.00.

An ADP National Employment Report, which showed private sector employers added more jobs than expected in December, undermined the safe-haven appeal of U.S. government debt on Thursday and added pressure to gold, analysts said.

Gold's gains have been driven largely by successive rounds of U.S. quantitative easing, which have kept pressure on long-term interest rates and fuelled fears of inflation. Any further easing measures have been explicitly tied to jobs growth.

"You could argue that the U.S. is creating jobs - and that is another sign that the U.S. economy is in recovery mode," Daniel Briesemann, an analyst with Commerzbank in Germany.

Closely watched U.S. non-farm payrolls data due on Friday is expected to show the economy added 150,000 jobs last month, after adding 146,000 in November.

Briesemann said that after the relief over the U.S. deal to avoid a fiscal crisis, financial markets were waking up to the challenges that lie ahead in U.S. budget talks.

"The euphoria is cooling down somewhat, and market participants are taking a more realistic view of what is ahead," he said.

U.S. lawmakers left unresolved a sticky issue involving $109 billion in planned spending cuts, promising more political showdowns on the budget in coming months.

"The deal to avoid a fiscal cliff has booted some problems into the long grass by a considerable distance, but there are still issues out there such as expanding the debt ceiling, which could prove to be difficult negotiations," said David Jollie, strategic analyst at Mitsui Precious Metals.

HEADWINDS FOR GOLD

Gold ended up around 7 percent in 2012, the 12th straight year of gains, but faces headwinds this year after posting its worst quarterly performance in more than four years in the last three months of 2012.

Gold importers in India, the world's biggest buyer of the metal last year, retreated a day after rumours of an import tax hike, as a weaker rupee helped keep prices around their highest level in two weeks.

"Physical gold demand may be negatively affected in the next few months by the fact that the Indian government is considering raising duties on gold imports even further," Commerzbank said in a note.

"The aim is to tackle the country's record-high current account deficit, for which - according to India's central bank - gold imports are roughly 80 percent to blame."

The Istanbul Gold Exchange reported on Thursday that Turkey's gold imports rose by 57 percent last year to 120.78 tonnes from 79.7 tonnes in 2011.

Among other precious metals, silver was down 0.45 percent to $30.83 an ounce, while platinum firmed 0.69 percent to $1,571.25 and palladium slipped 0.91 percent to $695.97 an ounce.