The Gaol Cave is found in Caelid. It can be found in the scarlet lake East of  Fort Gael. It can only be accessed using two Stonesword Keys to break an Imp Statue seal.

Quick walkthrough:

Proceed through the cave until you come to a lever. Pulling the lever will unlock the cells throughout the cave.

Proceed further in, and you will come to a hidden area (behind breakable wooden boards). The boss is at the bottom of a pit behind these boards.

After defeating the boss, DO NOT take the shortcut right away; instead proceed through the tunnel opening on the South-West side of the boss arena to obtain the Regalia Of Eochaid sword.