Grace Caps are light head armour in Xenoblade Chronicles. They have the highest Physical Defence of any light head armour in the game, although Master Glasses have a higher Ether Defence. They are not dropped or carried by any enemies, and can only be obtained once per playthrough.
After the party obtains the High Entia Emblem, a Grace Cap can be found behind a High Entia Door near the Sororal Statues in Satorl Marsh. To reach it, the party needs to ride the lift and jump off it near the top of its path, where a pale round disc can be seen.