While $500K of diamonds is indeed small, keep in mind that the market is controlled by DeBeers, an institution that may or may not survive in your doomsday scenario.

DeBeers proved themselves adept at maintaining price stability during the last world war, if that makes you feel any better. However, there are several scenarios whereby the price may drop rapidly, from liquidation of their storehold to technological advancement in synthethic diamonds. Bottom line: if you don't trust the government, then I'm not sure trusting DeBeers is that much better.

If you know a diamond dealer and can get Rapaport prices of R-3 or better, I could see where they might make a decent substitute currency. $500K of gold is less portable; you might consider platinum (or palladium) as it has industrial uses beyond the jewelry market.

I had a client with a nice watch collection who needed to carry undeclared money into the United States. After considering diamonds and gold, he ended up buying a somewhat rare $30K Rolex (used) and a new $76K Patek Phillippe in Geneva. Both of these brands have a good resale market and can usually be depended upon to increase in value. You might need to do some fancy talking with the customs inspector, but if you claim you bought the watch in the US and were merely travelling with it on your wrist you should be OK. Just don't make the rookie mistake of keeping the box, receipt, and papers in your luggage!