First water - Of the
Of the highest quality.
From the gem trade. The clarity of diamonds is assessed by their translucence; the more like water, the higher the quality. This comparison of diamonds with water dates back to at least the early 17th century, and Shakespeare alludes to it in Tymon of Athens, 1607. The 1753 edition of Chambers' Encyclopedia has this under an entry for 'Diamond':
"The first water in Diamonds means the greatest purity and perfection of their complexion, which ought to be that of the clearest drop of water. When Diamonds fall short of this perfection, they are said to be of the second or third water, &c. till the stone may be properly called a coloured one."