This is the 1413th most frequent Japanese word.
小
"Small" or "little."
The adjective '小さい' is used here to describe the size of the dog, showing its characteristic as small.
小さい犬が走っています。
A small dog is running.
The term '小さな' as a modifier indicates the size or scale of the town, emphasizing its relative smallness.
私は小さな町で育ちました。
I grew up in a small town.
'小さな' again modifies '宝石' (gem), describing its size as relatively small within a context.