There are 2 types of ferrite - one is a magnet and one is magnetic. I believe the "ferrite" that most people talk about is not a magnet, but it is magnetic. Magnetic means that it will stick to a magnet. A magnet will stick to your refrigerator. This ferrite is magnetic. It will not stick to your refrigerator.
I have a rare earth magnet on my digging tools. After I've been digging in the California gold country, my magnet will be covered with this ferrite, looking like a very dark gray/black fuzzy ball. I, too, have collected some in a bag.
This ferrite is basically the equivalent of iron filings. They are magnetic. Depending upon your age, you may remember as a kid there used to be a toy that was a man's face on a piece of cardboard. Glued over the face was a piece of stiff, clear plastic. Between the cardboard and the plastic were a bunch of these iron filings. You could use the magnet supplied with this toy to 'drag' around the filings to give the guy a mustache or a beard or hair on his bald head.
On my detector, the ground balance scale is based on the ratio of ferrous material in the ground to salt in the ground. Ferrous is magnetic with almost no conductivity, and salt is conductive with almost no ferrous/magnetic properties. Where I detect there is very high ferrous (ferrite) and very low salt in the soil. So my ground balance point is way over at the left (= high ferrous and extremely low conductivity) end of my scale, which is also the same part of the scale where iron targets are located, since they are ferrous (magnetic) and generally low conductivity. As you move towards the right/ center of the scale you will pass the areas of iron targets (again, high ferrous and low conductivity) and get to the middle of the scale where a heavy salt environment resides, like detecting in beach water, which is high salt and low ferrous. This part of the conductivity scale is also where small foil (a realtively low conductor) is detected.
The point where your machine ground balances works like a discriminator, in that the detector will subtract, or remove, those signals. This process also tends to reduce the strength of targets that fall near that point on the conductivity scale. Ground balancing your detector in salt water will actually diminish the signals from small foil, because they both reside near the same point on the conductive scale. So by manually ground balancing your detector at the far left, highly ferrous/low conductive end, it is sometimes referred to as "getting it out of the way." So if you are searching for small gold nuggets or gold chains which can have a fairly low conductivity level, also near foil, by moving the ground balance point all the way to the far left-end of the scale (high ferrous/low conductivity) will decrease your detectors likelihood of diminishing those small gold signals. That is why some people bring bags of pure ferrite to ground balance their detectors - it sets the ground balance point far away from the small gold area. My MXT-variant machine actually has a way to set the ground balance point at this far ferrous end, at start up, for this same reason.
I hope I didn't add any unnecessary confusion to the topic, but wanted to add more details based on my understanding.
