Sheath

I've seen Knuckles appear when sheathed, but I'm not sure whats causing it to appear. It does go away when I switch weapons and back.

It's a visual glitch.

I figured as much...

Pick up your knuckles from the equip slot, press tab to change weapon slots, right click to put it back. You, and anyone else in visual range, should now be able to see your knuckles on with other weapons on, as it replaces your gloves. But if a new person walks in after you glitched it, they won't see the glitch. There's also a few other methods.