Fool's after second gold watch (7)
I believe the answer is:
monitor
'watch' is the definition.
(I know that monitor is a more specific form of the action observe)
'fool's after second gold' is the wordplay.
'fool' becomes 'nit' (both can mean a stupid person).
'after' says to put letters next to each other.
'second' becomes 'mo' (both are short periods of time).
'gold' becomes 'or' ('or' is the heraldic name for gold).
'nit' put after 'mo' is 'monit'.
'monit'+'or'='MONITOR'
(Other definitions for monitor that I've seen before include "what a computer user may require" , "Observe over time" , "Keep an eye on" , "Check on - large lizard" , "Vet" .)