The dwarven jeweler is in the Dwarven Halls, in the south west section of the Dark Forest (entrance near the archer's guild, in the south west part of Rivertown). There is no rush on this quest (I cleared much of Rivertown and Verdistis, and then entered the castle, before going to the Dark Forest), though you can head there whenever you wish (if your level, equipment, potions and/or playstyle are sufficient for the creatures there).
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