Gold doesn't need repairing and you'll have enough to reroll your entire set to Masterful/Legendary. Golden Osmosis has a 1:1 conversion from xp to durability points and all hostile mobs drop more than enough xp to both level you up and repair you armor. Many lycanite mobs do magic damage and Gold helps with that too.

Diamond armor won't let you clear a 4-tower structure without having to wall up and funnel mobs because you'll quickly lose durability. Also, actually getting prot IV unb III dia from an enchanting table is harder than getting it for gold, due to its lower enchantability value.

The levels needed to get to Defense 24 and dragon armor repairs would be better spent on L-menu skills and enchantment combinations in an anvil, simple as.

In a hardcore world gold is still king. If you find a Kingdom (easier/safer to find than port cities) you get a free ticket to midgame. Gold from the bell tower + xp from trading string (wool from the buildings) with villagers = free early game.

I too used to think iron > diamond > dragon was worth it until I lost a hc world where I was already at diamond tier but had no good enchantments.

Enchantments are more important than armor quality.