I should have browsed a bit before I posted. I found some info on magnetic rocks and then it hit me like a ton of bricks.. Lodestones! Naturally occuring minerals where the first magnets. I found some info on About.com on the history of compasses. It doesn't answer my question directly, but it would stand to reason that naturally magnetic stones, ferrites, would magnetize a needle.
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Willie Vannerson
McHenry, IL