Go south through the huge desert, ignoring the town in the northern desert for now. Go east across the bridge, then go north across another bridge (the northern most one). The town is here. Enter the gates and be greeted by the Golem. Use the Fairy Flute to put him to sleep, and then kill him with your sword.

Taken from gamefaqs.com (http://db.gamefaqs.com/console/nes/file/dragon_warrior_g.txt).

Good luck!

Golem is at the entrance to a city.