The Diamond of Duncanthrax was a precious jewel owned by Duncanthrax and placed into the royal treasury at the beginning of the Flathead Dynasty. It is not known how or when it left there, but the item was spotted during the Second Age of Magic, popping up in various lairs and hidden parts of the empire (primarily in the Westlands), only to be brought back to town and sold on the black market. How the diamond keeps making its way back to these hidden hideouts and secret citadels of Duncanthrax is a mystery as the item does not appear to have much in the way of magical properties of its own.

SOURCE(S): Legends of Zork (game, personal correspondence from the author of 'Enter the Face Breaker' quest)