Gonzalo, the ’eye’ can be found in many cultures, and it seems as if it can have different meanings. Some of the meanings are, no doubt, long lost, but the tradition still live.
Rand, you are right, the general idea is, that the umbrella was used on the ruler’s private weapons, and maybe on the weapons of his lifeguard. I have however seen an umbrella crudely chiselled into a blade. No gold on the blade, only the chiselling, and it did not give you a feeling of royalty – otherwise the sword could have belonged to a ruler, had it not been for the chiselling.
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