True Gem Location

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In the Longsword of True Valour Quest, a rumor is given in the library about the location of the true pommel gem:

Library Clue[edit]

In the library go read a book. Here you get the option to Research the Longsword of True Valour:

This time, you do find the book you're after: "The life and suffering of Katarina Holyblade" by Ellaria, Hand of Dauros.
Unfortunately, the book doesn't seem to say anything about what happened after her death. You throw the book down angrily, but then you see something sticking out of a now-loose part of the book cover.
You pull it out, and it's the following text, heavily faded with age:

...ve fled th. hor..r. T.e G.m is .til. safe. Bla.e....
Hunted. H.nt.d b. the Bea.ts. Al.ays af..r me. Mu.t hide the ge...
Fo.nd a pl.ce to h..e it! No..dy will su.pe.t...
Brill..nt irony. Nob... will sus.ect the .em of the g.. of L.w to b. b.neat. a paragon .f Ch..s!

Filling in the blank reveals a clue to the location of the gem:

I've fled the horror. The Gem is still safe. Blade....
Hunted. Hunted by the Beasts. Always after me. Must hide the gem..
Found a place to hide it! Nobody will suspect...
Brilliant irony. Nobody will suspect the gem of the god of Law to be beneath a paragon of Chaos!

"Paragon of Chaos"[edit]

Paragon of Chaos? Paragon of Chaos.... how about a certain statue of a Warrior of Discord in Valmorgen!... that is, the statue of TaleSpinner the Mildly Insane.