Ouch, I may have reversed those two Names that are in the General area...one is downstairs and the other is upstairs. Sorry.
If I recall correctly, the gem did not have to be installed. It was just like the HoH armor in that it simply had to be in inventory. However, I can't recall if it could be in the bank as well.
I also seem to recall this question being asked in the past but I don't recall the post and I could not find it after looking around a bit. Maybe Lillu will see this post and tell us if, with this newer RoF2 client, will evolving items evolve regardless of their inventory location (equipped, installed, main inventory, bank).