Gem, ruby initially, set in ring (5)
I believe the answer is:
pearl
'gem' is the definition.
(pearl is a kind of gem)
'ruby initially set in ring' is the wordplay.
'initially' indicates taking the first letters.
'set in' indicates putting letters inside.
'ring' becomes 'peal' ('peal' can be a synonym of 'ring'**).
The first letter of 'ruby' is 'r'.
'r' placed into 'peal' is 'PEARL'.
(Other definitions for pearl that I've seen before include "Precious stone from shellfish" , "greatly valued" , "Drop" , "Precious gem" , "White - jewel" .)