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Well, it's not just a watch. It's a-- it's a sort of compass, but it points to vampires.
Stefan about the Compass in Unpleasantville

The Gilbert Compass was one of the three Gilbert Inventions created and used by Johnathan Gilbert, back in 1864 along with the Gilbert Rings and Device. Although it resembled a regular metallic compass with a large needle, it was in fact, an enchanted object spelled to detect and track down the vampire element in it's vicinity. The compass (nor any other invention created by Johnathan) did not actually work, and when the witch, Emily Bennett, who was believed to harbor romantic feelings for him learned this, she enchanted the compass to work as he intended it. The compass can also function as a pocket watch when the compass component is deactivated.

It has been passed down from generation to generation in the Gilbert line to the first born Gilbert son (i.e. the first known Gilbert to be given it was Grayson Gilbert, the oldest Gilbert son in his generation of Gilberts, and then it was passed down to Jeremy Gilbert after Grayson died). Johnathan was shown to be using it in 1864 and found out that Pearl, whom he had feelings for, was a vampire. Johnathan Gilbert also wrote information on the compass in his journals.

History[]

A page in the grimoire of Emily Bennett, as seen in Isobel, indicated that the Gilbert compass was created by Emily as one of several enchanted tools she gave to Johnathan Gilbert to combat against Mystic Falls' vampires, including the Gilbert Ring and the Gilbert Device.

In Family Ties, Carol Lockwood claimed that she wanted the pocket watch for her Founder's Party heritage display, but in truth, she wanted the compass to help the Founder's Council track the vampires who had returned to Mystic Falls. Originally Elena was going to give it to her, but since Jeremy wanted it and knew it was meant to be his, she didn't give it to her, and instead pretended not to find it. Mrs. Lockwood used Logan Fell to get close to Jenna to later steal the pocket watch anyway for their use. Richard Lockwood had the compass component that completed the watch and turned it into a vampire-seeking compass. Logan Fell used it and found Stefan in the woods with Vicki, shooting him with wooden bullets on sight. However, before he could finish Stefan off, Logan was killed by Damon. Damon took the watch and later in The Turning Point convinced Caroline to use it to track the new vampire who was in town since his vampirism threw off the signal. Damon then took it back and erased Caroline's mind with compulsion so she couldn't remember using it. Stefan later took it from his brother.

In Unpleasantville, Stefan gave the compass to Elena because of the recent vampire encounter she had when she crashed her car. The compass started to go off when Elena was getting ready for the 50s Decade Dance and it was pointing towards Noah, the same person who had caused her to crash, though. Right before he was going to feed on her, Stefan showed up and saved Elena. The compass has not been seen or used since then, and it is unknown where the compass is or who currently possesses it.

In The Dinner Party, Elena's ancestor Johnathan Gilbert in the 1864 flashback he pulls out the compass to prove to Honoria and Thomas Fell that there are no more vampires in Mystic Falls. After Thomas goes outside to see what made noise outside the house when compass in Johnathan's hand reacts to the presence of a vampire before Thomas is killed followed by Honoria who followed them out.

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