She gave me a wonderful watch, but I went and lost it.

Literal

She [topic-は] wonderful watch [object-を] gave-me [but-が], I [topic-は] lost-completely.

くれる is one of the giving/receiving verbs (授受表現): it specifically marks an inward gift to the speaker or speaker's group — 'X gave (to) me'. The complementary outward forms are あげる ('I/we give to X') and もらう ('I/we receive from X'). Without explicit marking, the recipient of くれる is presumed to be the speaker; here the meaning 'gave me' is automatic from the choice of verb. ~てしまう layers in regret or completed irreversibility — 'ended up doing / went and did' — so なくしてしまった carries both the act of losing and the speaker's chagrin. The clause-final が functions as a soft 'but', linking the gift and the loss with a hint of self-blame.