This is multipurpose gnome: he can be a tea cosy (the gnome who snuck inside for his tea break) OR you can make him as a toy 38 cm tall (mine is keen on indoor pot plants, having his very own watering can).
Pattern has instructions for a spade, mug of tea, flower in a pot and a watering can – use whatever combination suits you.

Uses your choice of 8 ply/DK yarn and some eyelash or feathers type yarn for the beard.
This pdf download pattern has instructions for how to make i-cords (the smallest needles listed are 2 double-pointed needles).
There are lots of pictures to go with the detailed instructions.