If using abrasive compound of any kind for polishing damascus, the contrasting etch would be removed or greatly muted. The 'texture' of the pattern may still be seen, but the bright & dark contrasting pattern would essentially be lost, as the polishing compound abrades the darkly-etched oxide away. The blade would have to be re-etched in acid, to restore the contrasting pattern.
EDIT:
I learned the hard way, with a Buck Custom Shop 110 in damascus & stag. I 'cleaned up' the blade with some Simichrome polish after I received it, and the eye-popping pattern went a uniform 'gray' in appearance after that. It's still an attractive blade, and the texture of the damascus is visible; but it doesn't look so obviously 'damascus' anymore.
If 'polishing' with a coating type of finish (wax, etc) that isn't abrasive, the dark oxide would be preserved and the pattern wouldn't be lost as a result.