The Moonstone begins with a letter telling how the Moonstone (a huge, yellow, and supposedly cursed diamond) was stolen from an Indian temple by John Herncastle during the Battle of Seringapatam and taken to England. The novel skips in time fifty years to a narration by Gabriel Betteredge, a steward for the wealthy Verinder family, relatives of the late John Herncastle. Betteredge has been tasked with telling the story of how the Moonstone came to Rachel, his employer's daughter, and what happened afterwards.
Franklin Blake, Rachel's cousin, first brings the Moonstone into the Verinder household. However, he had been followed by three Indians that were possibly looking to steal the diamond and return it to India. Franklin and Rachel hit it off almost immediately and start to fall in love.
Unfortunately for them, Rachel has another cousin, a Godfrey Ablewhite, who is also in love with her. Godfrey seems to be the better marriage candidate at first glance. He is a well established religious man and head of many charities. Franklin Blake also has an extra admirer, Rosanna Spearman, one of the servants. However, neither Rachel nor Franklin pay Rosanna or Godfrey much mind.
The night of the birthday party, the Moonstone is (inevitably) stolen from Rachel's bedroom. Rachel is completely inconsolable and takes most of her anger out on Franklin Blake for seemingly no reason. The police are called and find nothing, so Sergeant Cuff, a famous detective, is called. Rachel is so upset by all the activity that she leaves the house and goes to London. However, Rosanna also starts exhibiting some strange behavior. This leads Sergeant Cuff to suspect that Rachel stole the Moonstone herself to pawn off with Rosanna as an accomplice. Unfortunately, shortly after Cuff makes that conviction, Rosanna disappears. She had committed suicide by jumping into the quicksand down by the ocean. She left her final note with one of her friends but only Franklin Blake could claim it.
Franklin Blake eventually seeks Rachel out and asks her why she was so mad at him when the Moonstone was stolen. It turns out, she had seen him take the diamond from her room that night. Franklin immediately starts doubting his sanity because he had absolutely no memory of taking the Moonstone. Luckily for him, he has a chance encounter with Ezra Jennings, a doctor's assistant with some radical theories about memory. Jennings thinks that Franklin had been given opium that night and that's why he could not remember anything. He decides to experiment and give Franklin opium again to see if he will repeat the actions he took the night the Moonstone was stolen. The experiment works, as Franklin got up in the middle of the night and sleepwalked into Rachel's room to take the fake diamond Jennings had set out.
The question then became: What happened to the Moonstone after Franklin took it? Franklin re-teams with Sergeant Cuff and they hunt through all the major London pawnbrokers to see if any of them had received an object of great value. They get a tip that the Moonstone will be picked up from the bank at a certain date, so they congregate there to wait. On the appointed day, a man in disguise comes to pick up the Moonstone. By the time Franklin and Sergeant Cuff catch up to him, he is already dead. The three Indians had murdered him and taken the Moonstone back to India.
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