First, your oil pressure gauge isn't a real gauge. It's hooked up to an oil pressure "switch" which will register the gauge to read "normal" when oil pressure is above a certain PSI. If it drops below a certain PSI, then you will see that difference in the gauge and probably get an idiot light.

My guess is either the connection at the oil pressure switch is loose or you've got a bad ground in the circuit.

As for the knocking sound... you're saying the gauge is making the knocking sound, or the motor?