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£3k to spend on your ISA? Here’s a cheap gold stock I reckon could help you get rich in 2020

The soaring crude price might be dominating the financial headlines right now, but rather than buying one of London’s oil drillers I reckon investors are much better off buying shares in gold producers.

The 2020 outlook for precious metal prices was already quite robust on a mixture of slowing global economic growth, political uncertainty in Europe and North America, and an environment of low interest rates worldwide. But many brokers are expecting even higher prices following the emergence of military action and subsequent political tension between the US, Iran, and Iraq late last week and over the weekend.

Perky predictions

Gold values have continued to push on following a bubbly start to the year and, at recent prices of above $1,580 per ounce, they are at their loftiest since 2013. Bullion values have risen on the back of rising political tension between the US and key Middle Eastern states, and if the boffins at Goldman Sachs are to be believed then extra gains could be in the offing.

The bank pointed out that “spikes in geopolitical tensions lead to higher gold prices when they are severe enough to cause currency debasement,”and added that the flight-to-safety asset “performed well, even controlling for real rates and dollar weakness, during the beginning of both Gulf wars and during the events of September 11, 2001.”

Goldman Sachs kept its gold price forecasts locked at $1,600 per ounce though you can expect that figure to rise should the situation in the Middle East deteriorate further in the days and weeks ahead.

A top buy

Things were already looking good for bullion values as other political issues like Brexit and the US presidential elections have worried investors and economic data from Europe, Asia, and North America has rattled nerves, conditions that caused me to tip Shanta Gold (LSE: SHG) as a solid ‘buy’ for January.

The precious metals giant has already risen 6% in value since New Year’s Eve to 10.15p per share, and it’d take a braver man than me to rule out a move to fresh multi-year highs. A rise of just half of one pence would take Shanta to its highest valuation since the beginning of 2017.

But bubbly gold prices aren’t the only reason to buy into the AIM-quoted firm today. As I commented recently, production is rising by double-digit percentages, while Shanta has also impressed on the exploration front, raising its resource estimates at the New Luika asset in Tanzania late last year.

At current prices Shanta trades on a forward price-to-earnings ratio of just 7.3 times, giving ample space for fresh share price gains. It may not offer big dividends like Polymetal International or Centamin but that low rating still makes it a terrific buy in my opinion.

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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.