An Old Dagger/ Soul Wailer Quest?Follow

Ok i think this An Old Dagger Dropped off some skellies just inside of the Wailing Caves, or mayby it was outside in the Commonlands. Anyway, i examined it and it said i need to find a gem, which i did and it gave me the next clue>>> You need to find a Smithing Hammer near a forge. WHAT THE HELL?> Ive tried regular forges in town, or i think there is a forge INSIDE The Wailing Caves. Please let me know if Im on the right track in thinking that its in the Wailing Caves.Thanks in advance.!

Forge is in Storm Hammer