Lyric discussion by markzz 

Cover art for Diamonds lyrics by Boxer Rebellion, The

I think the song is referring to him being with a girl who broke up with a 'soul mate' and tried to get over it with a one night stand (from shallow nonsense = fooling around).

However it developed into a relationship when she started to feel a connection with him, partly to try and forget about the old lover (did you always want me to be something to mend a broken heart).

The songwriter however couldn't compare to the ex lover, who meant everything to the girl (I'm no good next to diamonds..when I'm too close I start to fade). He is apologising for not being able to compare.

However the other answers sound good too!

My Interpretation

this is closest to how the song 'feels' to me

This matches with what the songwriter said in an interview -- it was about being "the rebound guy" and things not working out.