Before going to Moria, you seek a contract with Golem.
Preparing for Gnome's Cave
Before you go to Gnome's Cave, it is recommended to purchase the Tractor Beam skill from someone in Alvanista castle's magic research center. That spell costs 4000.
Go to Beladum. You can reach Beladum using a ship from Alvanista.
From the dock, go down across the bridge and east into the cave. Go up from the stairs, go to the right across the bridge, and go all the way up to the door. In the SNES version, the password is ki, ku, ri, mu. In the GBA version, it's ki, ku, ri, n. In the PlayStation version, choose numbers 4, 4, 1, 1. After the door opens, go down the stairs to the next area.
In the next room, talk to the gnome and choose to help it. Walk slowly to allow the gnome to follow you. To get the gnome to the next room with you, make sure that the gnome is standing next to you. Go down the stairs.
In the next room, there are many attack gnomes. Run past them to avoid fighting, then wait for your gnome to catch up. If the attack gnome touches you, you should use Tractor Beam on the Clay Idols to kill them. Their defense is so high that nothing else will work. In this area, go all the way to the left, then all the way up.
Now, go up and to the right, and you will find the gnome's friends. Your gnome will go with them. Go to the right and down the stairs.
Cross the bridge and go through the door. From the save point, go to the right and flip the switch on the wall. When the gnomes come running, go back to the save point and go up. Don't go through the door yet.
Update Mint's tactic to Value HP over TP. Update Arche and Klarth/Claus's tactics to not cast spells. Cless/Cress should be equipped with Tiger Teeth and whatever his best long range attack is. Change your formation to put everyone in the center.
Flame Mantles provide protection from Earth. You can create a Flame Mantle by using a Rune Bottle on a Mantle or an Aqua Mantle. This may reduce the damage that you take in the upcoming battle.
Also, if you have any Hourglasses, use a Rune Bottle on them to turn them into Chrono Glasses. You can use them to stop time in battle for a while. This will help a lot. However, Hourglasses cannot be bought, and Chrono Glasses will be very helpful in a later battle, so you might not want to use them against Gnome.
Go through the door to start the battle. Gnome will frequently disappear into the ground and launch itself in four missiles. You can't target it during a missile attack, so you have to just wait for it to stop. It will eventually become four shadows on the floor, and the shadows will all move toward a single point. When the four shadows converge, Gnome will come out of the ground and be vulnerable. However, Gnome has a tendency to launch into another missile attack almost immediately, making this battle very time-consuming.
You can use Hourglasses/Chrono Glasses to temporarily freeze the Gnome if you wish, but as mentioned before, Hourglasses cannot be bought, and they are very useful in a later battle, so you might not want to use them here.
Cless/Cress's Tiger Teeth attack has a chance of stunning Gnome, so you can try to have Mint cast Hammer right before Gnome comes out of the ground, then have Cless/Cress use Tiger Teeth after that. Arche should use Thunder Blade, and Klarth/Claus should use Ifrit (if he has it) or Sylph.
Gnome's Cave, Part 2
The ?Book that you receive is just a weak weapon. Open the chest to get a spell for Arche. There are no more attack gnomes in the cave, so you do not have to worry about them on your way out.