A penny stock I’d buy as stock markets crash

It can pay to be prepared for when stock markets crash. Here’s a top penny stock I’m thinking of buying today and holding for years to come.

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I think Shanta Gold (LSE: SHG) could be a perfect penny stock for me to buy as stock markets threaten to crash again. Demand for safe-haven assets like precious metals is booming as investors pull their money out of riskier assets like stocks. This explains why gold has leapt almost 12 bucks in Tuesday trade to move within back whisker of $1,800 per ounce.

News of this fresh mutation has reinforced my belief that gold prices will remain robust. Though in truth I’ve been a fan of UK gold shares as an asset class long before the discovery of the Omicron variant. I thought getting exposure to the yellow metal was a good idea as inflation ran rampant across the globe. Latest figures on this front suggest that this particular issue could keep supporting metal prices as well. Data today showed eurozone inflation hit record highs of 4.9% in November.

Looking good for gold!

Central banks have begun tightening monetary policy to contain this threat, with others (like the Bank of England) tipped to act in the weeks and months ahead. This new mutation could hamper policymakers’ intentions if it poses a danger to the economic recovery. And it would provide the perfect conditions for gold to continue ascending.

There’s no guarantee that gold prices will continue marching north, of course. Increasing bond yields could stymie any further increases, as could soaring safe-haven demand for the US dollar. A ballooning buck essentially makes it less cost effective to purchase dollar-denominated assets like gold.

All things considered, though, I still think the gold price outlook is extremely bright. 

Full steam ahead?

I wouldn’t just buy Shanta Gold on the back of the gold price outlook, however. I’m also encouraged by ongoing exploration and development work at its African assets, news of which continues to reinforce the company’s profits picture beyond the near term.

This week chief executive Eric Zurrin described exploration work at its West Kenya project as “our most consistently high-grade drilling programme we’ve ever conducted at any asset in Shanta’s history”. This follows positive drilling work at its flagship New Luika mine in Tanzania which prompted the firm to last week raise the current reserve life through to 2026.

Critically, construction work at Shanta’s Singida asset in Tanzania is also on track (maiden output here is scheduled for 2023). This should turn the business into a 100,000-ounce-per-year gold producer.

A dirt-cheap penny stock on my radar

I think Shanta Gold shares are especially attractive at current prices of 12p. City analysts think the miner’s earnings will leap 179% year-on-year in 2022. Consequently Shanta trades on a forward price-to-earnings (P/E) ratio of just 7.5 times.

This low valuation leaves plenty of room for fresh share price strength, in my opinion. And particularly so if another stock market crash pushes investors towards safe-haven assets like gold. I’d happily buy this top penny stock for my portfolio today.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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