Yes, it can be (engraved watch, engraved invitation).

The word engraved is the past tense and past participle of the verb (to engrave) and can be used as an adjective for something that has been engraved.

Yes engraved is an adverb. Example: I received my engraved invitation early.

Gem's.

Gem's could also be 'gem is' so you have to note the context of the word to tell if it is possessive or 'is'

eg

The gem's green -- gem's = gem is

The gem's colour is green. -- gem's = possessive

An Abrasax stone is a gem engraved with the word Abraxas or Abrasax - a Greek word of mystic origin - the seven letters may represent the sun, moon, and the five classical planets other than Earth.

Of course, these alloys can be engraved.