As soon as I reached the last page of Rachel Lichtenstein's book, I wanted to go to Ray Street at the boundary of Clerkenwell and Hatton Garden  in the place once known as Little Italy  where in the middle of the road is a manhole cover through which you can hear the sound of the mythic Fleet river, which still flows beneath this part of London. This book gave me the hunger to hear it for myself and take consolation that primeval forces still exist beneath our modern city.

The river runs through this lyrical text, winding through all the tales and delivering the dark denouement. Warrior monks once had a wharf upon the Fleet where they moored their ships, returning weary from distant lands to tend verdant estates upon the hillsides descending to the river valley. In time, these religious communities gave way to Renaissance palaces, superseded by prisons for the unacceptable people and fine brick terraces for the artisans, all surrounded by squalor and thievery, as the growing city overcame the bucolic suburb and the river went underground.

Hatton Garden's reputation for diamond dealing, with which it is synonymous, came about at the end of the 19th century when De Beers chose to sell all its stones through London, creating a culture of related trades that persists to this day.

When Lichtenstein encountered jeweller Isadore Mitziman in Brick Lane (the subject of her previous book) in 2004, he inspired the journey that became Diamond Street. "It amazes me the whole place [Hatton Garden] doesn't cave in," he told her, "with the weight of gold and heavy metal above and all those ancient, watery passageways honeycombing the ground underneath."

Pursuing her quest for the essence of the place, Lichtenstein consulted a whole gang of glorious characters, collecting tales, history and lore on her way. And she explored the secret spaces in backstreets and basements where the past appears to linger in Hatton Garden, and the spirits of William Shakespeare, William Hogarth, Dick Turpin and Dickens may still be found. Her relationship to "Diamond Street" is also personal, through a family jewellery business in which she was employed and which her husband, Adam, manages today.

Alternating between candid interviews with those who carry the recent story of Hatton Garden, and accounts of her researches much further back in time, she creates a syncopated momentum that shifts between the personal perspective and the grand picture of history. Vivid and amusing sketches, such as her encounters with nonagenarian jeweller David Harris or the regulars at the Mitre, London's second oldest pub, gain poignancy set against the vast backdrop of recorded time. And it is these detailed stories of the working people that abide.

In the second half of the 20th century, a plethora of jewellery shops opened in Hatton Garden, shifting the business away from manufacturing for the wholesale market towards the retail trade, especially for engagement and wedding rings. Lichtenstein's book is like one of these shops, containing so many sparkling things, elegantly organised just as she once arranged diamond rings in a tray. It is an overwhelming trove of stories with a multiplicity of facets to intrigue.

The Gentle Author blogs about London at spitalfieldslife.com.

Put prosaically, Hatton Garden is a street in central London. For more than a century though it's been known, at home and abroad, for its jewellery dealers and for being the centre of the British diamond trade. A magnet for Jews escaping pogroms across Europe and poverty in the capital's East End, remembered by old-timers as a tightly knit place where Yiddish was widely spoken, it was once likened by a journalist to "Little Jerusalem in England's green and pleasant land".

The nexus of money and migration tends to breed rumours and myths. Hatton Garden, though never as demonised as Stepney or Whitechapel, often figures as a kind of upscale version of Sax Rohmer's Chinese Limehouse, one that's populated by clannish kinsfolk, mysterious brokers, ambiguous characters who look pauperish but may be loaded. Stories abound, as seductive as they are mostly unsubstantiated, of the street's underground network of secret chambers and corridors.

Such fabulations and occult fantasias are manna for writers about London. For the oral historian Rachel Lichtenstein, one of the few prominent female figures operating within the fuzzily defined field of contemporary psychogeography, Hatton Garden is where her grandfather and her parents worked. As a student she helped out at the family store, writing out price labels for jewellery and dropping off supplies for Orthodox and Hasidic diamond dealers.

Lichtenstein's previous book, On Brick Lane (2007), was a contribution to the popular field of disappearing London studies. It evoked lives and communities rendered fragile by real-estate developers, City encroachment, and the neighbourhood's discovery by "creatives". Shadows fall over Diamond Street too: the apprenticeship system that guaranteed high standards is on the wane, little polishing and manufacturing is carried out any longer in London, competition from companies in Singapore and Taiwan is rising.

Lichtenstein trained as a sculptor and takes relish in chronicling the craftsmanship of generations of polishers, setters and cutters. Forges, lathes, wooden pegs, turning machines, metal moulds: a poetry of production emerges from the long inventories of tools and equipment they wielded. In damp, sometimes ratty workshops, they handled gold, sapphire and precious gemstones, the calloused hands they ended up with contrasting with the smooth fingers and necks of the Russian tsarinas and Middle Eastern princesses for whose adornment their work is often bought.

These craftsmen perform a hallowed form of manual labour whose tactility is to be savoured at least as much as it is bemoaned. One goldsmith announces: "We will be the last people to handle many of the objects produced here with bare hands. They go into collections where they will be picked up with white gloves and spoken over in whispered tones before being carefully put back into a glass case."

This goldsmith and his colleagues were responsible for Siren, Marc Quinn's life-sized 2008 sculpture of Kate Moss, thought to be the largest man-made gold statue since Egyptian times. But his expertise and his pride in his work aren't unusual; many of Lichtenstein's interviewees, though earning meagre salaries, carried on well after their retirement ages. Their collective eloquence about their graft and guile makes Diamond Street a timely companion volume to Richard Sennett's The Craftsman (2008) and Matthew Crawford's Shop Class As Soulcraft (2009).

Streets are not islands. They get their meaning from the lanes and avenues around them. Hatton Garden is in a neighbourhood that used to be heavily populated by Italians. In the 19th century they worked as organ grinders, ice-cream sellers, glass blowers, magnifying-glass manufacturers. They often did business outdoors, creating public theatre out of their retailing nous, drifting away after German bombing and British internment during the second world war.

In the company of Iain Sinclair, her co-author on Rodinsky's Room (1999), Lichtenstein tramps through the avenues and back lanes of nearby Clerkenwell and Farringdon, hearing stories of long-gone antiquarian booksellers who dealt with excessively grasping customers by ripping the titles they craved before their eyes.

What she finds in the Hatton Garden workshops  filings and dust, scraps and broken pieces of precious metal  also describes the fragmented narratives that, allied with diligent archival trawls, she assembles into this fascinating and much-needed account.

The longer Diamond Street goes on, the greater the tension between Lichtenstein's preferred mode of writing  polite, research recounted in the tone of extended journal entry  and more experimental approaches that include getting American artist Mary Flanagan to use Google Street View to conduct a hybrid of digital flanerie and cyber séance on Hatton Garden.

Later she goes down into the sewers of the Fleet, the second largest river in Roman times, to divine the area's subterranean essence. There, in the echolalia of underground, she discovers that she had "only just begun to scratch the surface" of her subject. Perhaps that  when it comes to writing about London, or any place really  is all one can hope for.