I suspect that by the time you might want to do the gem forging, you'd probably still rather have the gem than the gold.
OTOH, I guess you could set up a serious alchemy farm with fire nations if this was implemented.
OTOOH, doing that in the early game would leave you a long way behind on research.
OTOOOH, the ramp-up could be scary by mid-game.
Maybe if the spells were a high research level... and maybe if they cost 10 gems to make 11... (edit: ninja'd!
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I think it's potentially overpowered in the early game (and if it wasn't overpowered, you'd just research instead), and in fact in the late game - imagine if all of Pythium's or BL's S1 researchers could magically turn into clams at the player's whim!