Watermark Loot drop system

If anyone has reliable info on how this works please enlighten me about it.
From what ive heard and found out Quests rewards, Crafting, Trading post items, Vendor items does not increase your watermark loot drop gear score number. And its only random drops from enemies and chests.

im 515 GS right now and lets say for example a 529 chest piece drops in the world. is my watermark somewhere between 515 and 529 or is it 529?
If you have any info about how this works let me know

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