Noticing a well-dressed McCormick strolling out of the Hotel Bristol across the street (accompanied on his arm by a Mexican chiquita, Senorita Lopez (Jacqueline Dalya), flashing a low-cut dress and carrying a parasol), the two rush toward him. Their former boss smoothly invites them to talk business and have a drink in a cantina. They enter the bar - shot in a mirror reflection - and are immediately offered an excuse for not being paid: "The fact is, I haven't been paid off on that contract yet myself. If I had the money, you'd get it first thing. You know that." He then offers them more contract work or partial payment (with the balance paid later).

Not wanting to be suckers again by getting all "liquored up," they demand all their money "right here and now." The burly McCormick reaches for a whiskey bottle and strikes Curtin across the face with it. In a rough, dirty fist-fight, the two gang up and finally wear their opponent down, beating the man senseless in the brawl until he admits: "I'm licked." They extract and count out their swindled pay from their defeated enemy's bulging wallet, fling the remainder of the bills contemptuously at his bloodied body, and then tip the bartender "for the drinks and the use of the cantina."

At a water fountain while the two victorious Americans bathe their wounds and rinse away blood after defeating their common enemy, Dobbs suggests that they quit hanging around Tampico waiting for a job. They'll only spend their money and end up being bums again - "pushin' guys for dimes and sleepin' around in freight cars." Prompted by Howard's stories of prospecting, Dobbs fervently proposes that they consider "gold-digging" - with well-oiled, poetic phrases:

Why not try gold diggin' for a change? Well, it ain't any riskier than waitin' around here for a break. And this is the country where the nuggets of gold are just cryin' for ya to take 'em out of the ground and make 'em shine in coins and on the fingers and necks of swell dames.

Their "money would last longer" while they lived more cheaply out in the open: "The longer it lasts, the greater our chance of diggin' something up would be!" With the right equipment - picks, spades, pans, and burros - and the experienced guidance of Howard who can speak Spanish (with the local Mexicans and Indians), they decide that prospecting may be rewarding without much effort:

Dobbs: (skeptically) He's too old to take along with us, of course. We'd have to pack him on our backs.
Curtin: You can't tell about some of those old guys. It's surprising sometimes how tough they are. I don't know what gold looks like in the ground. I've only seen it in jewelry store windows and people's mouths. Do you know anything about prospectin'?
Dobbs: Eh, not much, when you come right down to it.
Curtin: We might have real use for an experienced guy like that old-timer.
Dobbs: Let's go hunt him up right away.

Howard is delighted to be given the opportunity to gamble on gold once more:

Of course I'll go. Any time, any day. I was only waiting for one or two guys to ask me. Out for gold? Always at your service.

By pooling their limited resources - their $150 each with Howard's $200 of investment money, they have a total of $500 between them for their venture: "If you don't take a risk, you can't make a gain." Still short of funds, Howard doubts that it is "enough to buy the tools and weapons and the essential provisions...Meat's one thing and bandit's another. Bandit country is where we'll be going. We ought to have six hundred bucks between us." Dobbs' feverish wish to hunt for gold is quickly deflated and he lowers his head in depression. Only a few feet away, the Mexican boy who sold him a lottery ticket days earlier recognizes his lucky customer and demands his ten percent share for having sold him the prize-winning ticket: 3-7-2-1 [an unlucky sum of 13]. The ticket wins a 200 pesos prize and Dobbs is thrilled by his monetary gain:

Just look at that fat, rich, printed number! That's the kind of sugar Papa likes. Oh, two hundred pesos! Welcome, sweet little smackeroos. (He kisses his lottery ticket.)

Dobbs gives a percentage share of his winnings to the boy and then decides to add the rest of his winnings, all 200 pesos, to their stake so that their expedition can be properly financed:

(To Curtin) This is an all-or-nothing proposition, ain't it? If we make a find, we'll be lightin' our cigars with hundred dollar bills. If we don't, the difference between what you put up and what I put up ain't enough to keep me from being right back where I was this afternoon, polishing a bench with the seat of my pants. Put 'er there, pard.

Making a huge show of his faithful partnership, Dobbs extends his hand toward Curtin for a handshake in a jovial expression of camaraderie, in front of a 'framed' closeup of Howard's face. The prospector knowingly looks up at the two of them, realizing full well what gold can do to such demonstrations of brotherly feelings and vows of undying comradeship.

In the next scene, the trio are in the third class compartment of a rattling train (crowded with Indians and Mestizos) headed from Tampico for Durango, toward the remote Sierra Madre Mountains in search of gold. Holding a map on his knees, Howard discusses with Curtin (while Dobbs dozes) how they must stay off the beaten track - with allusions to the ever-present dangers:

We gotta go where there's no trails at all - where you can be positive that no surveyor or anybody who knows anything about prospectin' has ever been there before.

All of a sudden, the train's brakes are applied and it jolts to a halt - as bullets sing through the windows of the coach. Mexican bandits attack the train from a hillside and from horseback. Howard shouts in Mexican toward the passengers: "Echense al piso, pronto. De barriga, andenle." (On the floor everybody. Lie down quick.) The three reach in their luggage for their weapons and fire through the windows at the bandits, killing or wounding some of them (joined by Mexican troops ready for the ambush).

The train picks up speed again as the last of the remaining bandits, their disreputable leader - one who wears a gold-colored sombrero and flashes a gold tooth - dubbed Gold Hat (Alfonso Bedoya) - gallops alongside the train and trades fire with Dobbs. He brags about his ability to shoot three of the bandits, but regrets missing the leader - [the personification of the evil side of gold]:

That bandit with the Gold Hat that rode alongside the train - I had my sights on him nice as you please, but the train gave a jolt and I missed him. Sure wish I'd got him.

After the bandits are driven away, a conductor non-chalantly announces that not too many passengers were killed in the ambush in the dangerous, foreign territory: "Big boulder on the track so train stop. Bandits get big surprise because soldiers on the train waiting for them - not many passengers got killed." Howard has picked up his map from the floor and continues as if nothing had happened:

Now here's where we're bound for - hereabouts. It don't show properly whether it's mountain, swamp, or desert. That shows the makers of the map themselves don't know for sure. Now once on the ground, all we got to do is open our eyes and look around. Yeah, and blow our noses too. Believe it or not, I knew a feller once who could smell gold just like a jackass can smell water.

Later, outside a general store in the small village of Durango, where the pack burros and supplies are selected, purchased, and accounted for by Howard (with an experienced eye and knowledge of the native customs and language), the storekeeper tells them about where they are traveling - translated by a cheery Howard:

We're going into the country that's very wild and dangerous. Have to cut our way through jungles and climb mountains so high that rise above the clouds. With tigers so big and strong they can climb trees with burros in their mouths...Good! Glad to hear such tall tales 'cause that means mighty few outsiders have ever set foot there.

They saddle their burros and soon are climbing into the mountains of the Sierra Madre. After a few days, both Dobbs and Curtin are in tow - sweaty, exhausted, and staggering to keep up with the fast, jaunty pace set by the hardy Howard. Dobbs wants Howard to slow down his blistering trail up the steep mountainside, dropping to the ground with Curtin for a much-needed water break. With less excitement than earlier expressed, Dobbs begins to show the first signs of bitterness. He bickers, complaining about the older man, and Curtin has second thoughts about prospecting:

Dobbs: Hey, if there was gold in them mountains, how long would it have been there? Millions and millions of years, wouldn't it? So what's our hurry? A couple of days more or less ain't gonna make any difference.
Curtin: Remember what you said back in Tampico about having to pack an old man on our backs?
Dobbs: That was when I took him for an ordinary human being - not part goat. Look at him climb, will ya? (They both watch Howard climb quickly up the tortuous, steep slope.)
Curtin: What gets me is how he can go all day long in the sun without any water.
Dobbs: Maybe he's part camel too.
Curtin: If I'd known what prospecting meant, I'd have stayed in Tampico and waited for another job to turn up.

Dobbs glances at a gold-streaked rock on the ground and feverishly notices yellow glittering specks "like gold." They euphorically splash water around, talking about striking it rich in the "Mother Lode," and calling Howard back to examine their find of veins in the rocks. Howard deflates the greenhorns' expectations by identifying the veins as pyrites or fool's gold - essentially worthless rock: "This stuff wouldn't pay you dinner for a carload." With a jaundiced look, he warns them to be more careful about wasting water: "Next time you fellas strike it rich, holler for me, will ya, before you start splashing water around. Water's precious. Sometimes it can be more precious than gold." He winks knowledgeably at them - toward the camera - and proceeds on.

In the next scene, they are traveling across flatter country, with hills dotted by cactus. Indifferent to the prospectors' journey, nature buffets them with a fierce, howling windstorm - "a norther" according to Howard - "big winds from the north this time of year. When they blow hard, this desert country stands right up on its hind legs." And then they are soon cutting through thick jungle underbrush, cutting the growth in the valley with machetes. Howard predicts that they are close to their goal: "I reckon there's only a few more yards of this heavy stuff. Pretty soon, we'll be out of this valley." Then dripping rains fall on them, as Howard tirelessly pushes them on. That night around a small campfire cooking beans on a skillet, Dobbs and Curtin are too tired to eat and lie sound asleep next to the fire, while Howard dines (and extols the great food) and then serenades them with his harmonica.

Hey you fellas, how about some beans? Ya want some beans? Goin' through some mighty rough country tomorrow - you better have some beans!

The following day in the middle of the Mexican wilderness, Dobbs is thoroughly beat, fatigued, and pessimistic. He admits failure and wants to turn around:

Dobbs: You know what I'm thinkin'. I'm thinkin' we ought to give up. Leave the whole outfit - everything behind and go back to civilization.
Howard: What's that you say? Go back? Ha, ha. Well, tell my old grandmother! I've got two very elegant bedfellows who kick at the first drop of rain and hide in the closet when thunder rumbles. My, my, my, what great prospectors, two shoe clerks readin' a magazine about prospectin' for gold in the land of the midnight sun, south of the border, or west of the Rockies, ha, ha, ha...
Dobbs (picking up a rock and threatening): Shut your trap! Shut up or I'll smash your head flat.
Howard: Go ahead, go ahead, throw it. If you did, you'd never leave this wilderness alive. Without me, you two would die here more miserable than rats.
Curtin: (after restraining Dobbs) Aw, leave him alone. Can't you see the old man's nuts?

Howard wonders who is truly "nuts" - calling them two "dumb specimens":

Let me tell you something, my two fine bedfellows, you're so dumb, there's nothin' to compare ya with, you're dumber than the dumbest jackass. Look at each other, will ya? Did you ever see anything like yourself for bein' dumb specimens.

Then he spontaneously dances a jig in front of them, pounding his feet into the soil laced with gold while mocking them:

You're so dumb, you don't even see the riches you're treadin' on with your own feet. (Howard bursts into laughter, howling at them. He picks up some of the earth, as the two drop to their knees scratching at the ground.) Yeah, don't expect to find nuggets of molten gold. It's rich but not that rich. And here ain't the place to dig. It comes from someplace further up. Up there, up there's where we've got to go. UP THERE!

There's a further ascent that they must make. Howard turns and points (with a camera pan shot) toward a towering mountain peak behind them - or to the heavens, fates and beyond. The soundtrack accentuates his words. By a stream, a close-up of water swirling in Howard's mining pan dissolves into view. Dobbs and Curtin look in amazement at the grit in Howard's pan, noticing that the gold doesn't look "much different from sand...plain sand. It don't glitter - I thought it would glitter." The old prospector emphasizes that gold is arbitrarily valued - it's "some other guy's job":

It'll glitter when it's refined. That's some other guy's job. All we gotta do is mine it and get it back there. You know, gold ain't like stones in a riverbed. It don't cry out to be picked up. You got to know how to recognize it. And the findin' ain't all. Not by a long shot. You got to know how to tickle her, so she'll come out laughin'. Yeah, it's mighty rich. It will pay good...Oh about twenty ounces to the ton.

The amount that they can expect to mine each week is dependent upon "how hard we work." Howard proposes pitching their camp a mile or two away down the mountainside, just in case somebody happens by. Filing a claim would also not be profitable. Soon an emissary from a big mining company would turn up with a paper in his hand claiming rights to the mine. Then, he grins at his companions:

Well, how does it feel, you fellers, to be men of property?

After a few weeks, they have built a long, wooden sluiceway to sift the dirt taken from the mine. Dobbs looks back at his former innocence:

I sure had some cockeyed ideas about prospectin' for gold. It was all in the finding I thought. I thought all you had to do was find it, pick it up, put it in sacks, and carry 'em off to the nearest bank.

They test their water sluice, opening the gate and letting water run down to wash the sand and separate it from the gold. Their gold-find brings temporary and tentative unity among the group as they work side-by-side to mine the valuable gold dust.

One fateful night at their camp - a turning point in the film, a close-up reveals a scale where the proceeds of the day's work are weighed. [The division of their gold shares also divides the unity of the group and escalates the growth of their mutual suspicions, friction and paranoia.] Howard estimates that the gold dust they have collected is valued close to five thousand dollars worth. Dobbs is impatient to begin dividing the gold:

When are we gonna start dividing it up?

Curtin doesn't agree with splitting the loot so soon: "What the use of dividing it at all? I don't see any point. We're all going back together when the time comes. Why don't we wait until we get paid for the stuff and then just divide up the money?" Dobbs argues "for dividing it up as we go along. Make each guy responsible for his own goods." Thinking himself the "most trustworthy of the three," Howard thinks he could have guarded all their portions. That would have been a better alternative than letting the untrustworthy Dobbs ("a thief at heart") watch over the goods:

Howard: Suppose you were charged with takin' care of the goods. One day I'm deep in the bush and Curtin's on his way to the village to get provisions. That'd be your big chance to pack up and leave us in the cold.
Dobbs: (offended) Only a guy that's a thief at heart would think me likely to do a thing like that!

Howard believes his age and slowness would keep him trustworthy and prevent him from running away with the loot. Instead of pooling their treasures together, they decide to evenly cut up the proceeds three ways every night - that would relieve Howard of the distasteful responsibility of watching all the earnings. Each man will have to hide his share of the treasure from the other two:

Howard: After we save and got a couple of hundred ounces, it'll be a nuisance carryin' little bags hangin' from our necks, and each of us will have to hide his share of the treasure from the other two - and having done so (he chuckles to himself) will be forever on the watch that his hiding place is not discovered.
Dobbs: What a dirty filthy mind you've got.
Howard: Oh no, not dirty, not dirty baby. Only I know what kind of ideas even supposedly decent people get when gold's at stake.

The gleam in Dobbs' glowing eyes is one of sinister greed, guarded anxiety and imagined mistrust, as the old man weighs the gold dust and divides the delicate grains of sand on the scale into tiny bags. Dobbs begins to feel suspicious and fearful of his two partners.