[PeeWee]

Spoiler
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That gem is needed for the horn of valhalla upgrade. You get the horn somewhere in the bridge district. Search it out and ya will find it. Take the horn to the smith in the Prom district and he tells you that you can upgrade it to a brass horn.

give him like 2k in gold and the horn and a diamond I think. I found my first diamond from the thieve's guild but later found out they are really random. I went to trademeet to reload a few times to get two diamonds from the smith shop there. I didn't reload for this purpose but just happened to have noticed after trying to rob who I could.

The brass horn summons a warrior that stays fighting for you a while. I'm sure the next upgrade will be a stronger warrior. The brass guy seems to have a strong magic resist.

Now I'm going to be on my way to get that gem. I consider this one of the pieces that lets a melee person solo easier. Woohoo, And I've been looking everywhere for it.