Why is it that when referring to gold a “carat” is a measurement of purity but when referring to diamonds a “carat” is a measurement of weight? Surely it would make more sense to give these measurements different names.
They do have different names. Gold purity is stated in karats (k), while diamond and other gemstone weights are expressed in carats (c or ct). They only sound the same. Not to be confused with the carets or the carrots, which are editorial marks and vegetables, respectively. 
That explains it then, excuse my ignorance 
Mittu, your last question was a very good one, and it deserves an answer.
In one sense, it would make more sense to give them different names - different sounding names! Imagine if carpenters had inches for measuring boards and ynches for measuring everything else.
One excellent sensible solution would be to use standard SI units. In technology where many different things must be measured, having a single system with some well thought out relationships in it is vastly easier.
In another sense it makes sense to do it exactly the way they do now. If they told you a wedding ring was 3/4 gold and weighed so many grams and at today’s price the gold content was worth $88.45, it’d be much harder to talk you out of $700 for it. Since they are naming the units, leaving things mysterious, not to mention a little historic sounding, makes all kinds of sense to them.
If I sound bitter, it’s because I am. Well, maybe not that bitter. But I don’t think there’s a reasonable rationale for using special units that people don’t have much experience with, to peddle something they have to spend big money on without much knowledge to begin with.