The spawn rate was most assuredly not perfect as people were getting 100+ gems in an hour. That was completely economy-breaking and the nerf needed to come and quickly as well.
However.
I feel that the nerf, as it happened, isn’t really well thought-out. While some spawn nerf was justified, making a new feature of the patch basically non-existent again is not very smart (especially since not everyone was here for the few minutes where Gnomes did spawn).
It would, in my eyes, be far better to make an adjustment to what the Gnomes drop. Making the 20 gems and Vault Keys rarer while increasing the not-so-special rewards like souls while still letting Gnomes happen would keep things motivating for the players.