An old folk belief explains the gold-hoard of dragons thus: When a lindworm lies on top of a piece of gold, it makes the dragon grow bigger, and the gold hoard will grow as well.
In the east of Iceland there is belief in a serpent or dragon that is supposed to live in the Lögurinn, a long lake through which the Lagarfljót river flows. It takes its name from the river and is known as Lagarfljótsormur or the Lagarfljót Worm. It is Iceland’s best known monster, sometimes referred to as Iceland’s Nessie. This it the story of its origins:
In ancient times there was a woman living on a farm near the Lagarfljót. She had one teenage daughter, who she loved very much. She gave this girl a gold ring.
The girl asked her how she could profit the most from the gold, and her mother answered that she should take a lindworm and lay it on the gold. The gold hoard would grow with the worm and thus increase and make her rich.
The girl got herself a tiny lindworm and laid it on top of the gold ring inside her linen trunk and left it there for a few days. When she next looked inside the trunk, the worm had grown so big that it was about to burst out of the trunk. The girl got scared, grabbed the trunk and threw it into the river with the worm and all the gold.
A long time later people started seeing the worm in the river, grown huge, mean and monstrous. It would attack, kill and eat people and animals that were trying to cross the river. Sometimes it would stretch itself upon the river banks and spew poison.
This was very troublesome and people feared crossing the river, but none knew any way of stopping the beast. Finally two Finns – Finns being considered among the greatest of sorcerers – were hired to see what could be done. They dived into the river but quickly surfaced again, saying that the worm was very powerful and neither could it be killed nor the gold retrieved to stop it growing bigger. They added that there was another worm under the gold hoard, and that one was even bigger and meaner than the first. They dived back down and were able to bind the worm down into the river bed, by putting one bond around its middle, just behind the flippers, and another one just above the tail.
Because of these bonds the worm can no longer kill or attack, but sometimes it hunches up its back so that it rises up from the water. When this happens it is usually an omen of great tidings, usually of the calamitous kind, such as a draught or a hard winter.
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