A shepherd boy named Santiago retires for the night in an abandoned church with his flock of sheep. An enormous sycamore tree has grown in the place where the sacristy used to be. This is where Santiago falls asleep and dreams a recurring dream.
The next morning, Santiago talks to his sheep about the unnamed Andalusian girl he is in love with. Santiago will see this girl in a few days, when he sells his flock's wool to her merchant father. Because his parents wanted him to become a priest, Santiago has studied Latin, Spanish and theology in a seminary, but he ended his studies prematurely, desiring instead to travel the world. That is why he became a shepherd.
On his way to see the merchant and his daughter, Santiago visits the village of Tarifa. There he meets an old woman who interprets dreams, which she says are the language of God. Santiago recounts his recurring dream to the old woman: He is in a field with his flock when visited by a child who transports him to the pyramids in Egypt; there, the child says, Santiago will find a hidden treasure. Each time Santiago is about to find out the specific location of the treasure, though, he wakes up.
The old woman tells Santiago that she will interpret his dream on one condition: She won't charge him any money, but Santiago has to share with her one-tenth of any treasure he finds. Santiago agrees. The old woman says the dream is in what she calls "the language of the world," and that Santiago needs to travel to the pyramids, where he will find a treasure that will make him rich. Because the old woman's interpretation is so straightforward, Santiago leaves her house upset and disappointed. He claims that he will never again believe in dreams.
The Alchemist has many themes, but its overriding message is that people must follow their dreams. This novel is full of examples of characters who pursue their dreams — and characters who don't. It is highly appropriate, therefore, that Coelho's book begins with a dream.
The Alchemist's protagonist, or main character, is named Santiago for a reason. Santiago is Spanish for St. James — that is, the apostle James, one of the twelve initial followers of Jesus. Santiago is the patron saint of Spain, and his remains are thought by Roman Catholics to reside in the Spanish town of Santiago de Compostela, which is considered the religion's third-holiest city after Jerusalem and Rome. Since the Middle Ages, millions of Roman Catholics have made a pilgrimage to the grave of St. James in Santiago. Thus the name is associated with pilgrims — seekers after spiritual connection. The shepherd boy Santiago will become such a pilgrim.
Santiago spends the night and experiences his recurring dream in a sacristy, the room in a church where sacred vessels and vestments are kept. It is literally a sacred place. And yet, just as he rejected his parents' plans that he join the priesthood, Santiago must leave the sacristy, in order to find God. Thus the episode with which The Alchemist opens is an ironic one.
The placement of a sycamore tree in the sacristy is highly significant. Sycamores are native to Egypt, the location of the pyramids Santiago dreams of. Throughout The Alchemist, Egypt will be Santiago's focus and his goal.
The fact that the old woman's interpretation of Santiago's dream is more or less identical to the dream itself seems to indicate that we should trust our dreams, taking them at face value rather than examining them for hidden significance.