Investors who've been brave enough to invest in commodities like gold and silver have reaped some of the biggest returns in recent years. Yet as larger institutional investors like pension funds have joined the commodity bandwagon, they've also started worrying about whether the impact they've had on commodities markets may have turned their bullish bets into self-fulfilling prophecies -- and caused a great deal of harm to the global economy in the process.

A long time coming
Money managers, politicians, policymakers, and the general public alike have argued over whether increasing interest in commodity markets has distorted their market mechanisms. Back in 2008, when oil prices got close to $150 per barrel, some people argued that ExxonMobil (NYSE: XOM), ConocoPhillips (NYSE: COP), and Marathon Oil (NYSE: MRO) were prime suspects in restricting supply and pushing gasoline prices higher.

You've seen the same story in other markets. With gold and silver, individual investor interest in SPDR Gold (NYSE: GLD) and iShares Silver Trust (NYSE: SLV) have undoubtedly fueled some of the big upswing in prices in recent years. Moreover, the allegations go both ways -- the Commodity Futures Trading Commission last year interviewed metals traders at JPMorgan Chase (NYSE: JPM) and other firms to investigate whether full-scale manipulation of the silver market had occurred. Lawsuits last year pointed to JPMorgan and HSBC (NYSE: HBC) as having huge short positions in silver.

Lives on the line
The difference now is that commodity investing is now more widespread than ever, touching just about every market. With the proliferation of commodity ETFs, investors can bet on the prices of almost anything they want without having any intention of ever actually taking delivery of a physical commodity.

It's at this point that free-market economists trot out the old adages about how speculators are essential to functioning markets. The problem, though, is that those speculators are themselves becoming uncomfortable with what their actions are doing to commodity prices -- and regulators are taking notice. Reuters recently reported that several European hedge funds are increasingly concerned that their investments are linked to price inflation, which has been a mere inconvenience in the developed world but which has caused economic havoc within poorer nations.

With one estimate putting commodity-linked investment volume in the range of $400 billion, it's not surprising that pension funds and institutional investors could be moving markets. And though not everyone agrees that speculation is responsible for high price levels, many believe it has made trade in those markets more volatile, making it much more difficult for actual end-users of commodities to manage their risks.

The ethics of scarcity
Of course, the real challenge is dealing with the ethics of commodity investment is understanding that there are two sides to every transaction. For every poor person in an emerging-market country who struggles to make enough money to afford a daily meal, there's a poor farming family in an emerging-market country who benefits from making a bit more selling their crops. Just as those in poverty may struggle with higher energy costs, entire national economies in financially challenged parts of the world depend on revenue from natural resources to support their populations. The question isn't as cut and dried as always supporting lower prices.

With big commodity purchases among institutional investors, like the University of Texas endowment's $1 billion purchase of gold bullion, the trend toward making commodities a permanent part of asset allocation strategies is stronger than ever. Pension funds shouldn't all jump into the commodity pool just because everyone else is doing it, but as a legitimate alternative investment to stocks and bonds, commodities shouldn't be off-limits to institutions trying to ensure a prosperous retirement for their constituents.

Rather than trying to limit interest in commodities -- which is just as likely to backfire as it is to work -- policymakers should instead address the underlying supply and demand fundamentals behind commodity price trends and take real steps that will help guide market prices to their optimal levels. Until they do that, speculators will remain a convenient scapegoat.

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Fool contributor Dan Caplinger knows common sense is a rare commodity. He owns shares of iShares Silver Trust. The Motley Fool owns shares of JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy shines like silver on a summer morning.