Did Luther believe in gnomish creatures?

Luther's objective was to express the Bible using words used by ordinary Germans. The following is an extract from his Letter on translation:

We do not have to ask the literal Latin how we are to speak German, as these donkeys do. Rather we must ask the mother in the home, the children on the street, the common man in the marketplace. We must be guided by their language, by the way they speak, and do our translating accordingly. Then they will understand it and recognize that we are speaking German to them.

The Latin vulgate translates Lilith as "Lamia". Wycliffe also uses "Lamia", translating the whole verse as

fiends, and wonderful beasts, like men in the higher part, and like asses in the nether part, and an hairy, shall meet; one shall cry to another. Lamia shall lie there, and find rest there to herself;

There are many interpretations and beliefs concerning lamia. They were often regarded as demonic or mythological, or both, may eat children and may seduce young men and suck their blood. They were unnatural beings of the night, and Luther felt that concept was best expressed in German by the German word kobold. Not all kobolds were said to live in mines and not all were bad, some were more akin to brownies (after which Lady Baden Powell named the younger girls in the Girl Guide/Boy Scout movement).

Luther's father, Hans Luder, was a miner and a smelter, so it is likely Luther would have been most familiar with the mine-dwelling kobolds. The standard work on mining for almost 200 years, though not published until after Luther's death, was written by Georgius Agricola. This contains the following (Book 4, page 217):

In some of our mines, however, though in very few, there are other pernicious pests. These are demons of ferocious aspect, about which I have spoken in my book De Animantibus Subterraneis. Demons of this kind are expelled and put to flight by prayer and fasting.

Die Animantibus includes the passage:

"Then there are the gentle kind which the Germans as well as the Greeks call cobalos, because they mimic men. They appear to laugh with glee and pretend to do much, but really do nothing. They are called little miners, because of their dwarfish stature, which is about two feet. They are venerable looking and are clothed like miners in a filleted garment with a leather apron about their loins. This kind does not often trouble the miners, but they idle about in the shafts and tunnels and really do nothing, although they pretend to be busy in all kinds of labour, sometimes digging ore, and sometimes putting into buckets that which has been dug. Sometimes they throw pebbles at the workmen, but they rarely injure them unless the workmen first ridicule or curse them.

Belief in these seems to have been general amongst miners.

In the book of Luther's table talk(section 574) is:

The devil vexes and harasses the workmen in the mines. He makes them think they have found fine new veins of silver, which, when they have labored and labored, turn out to be more illusions. Even in open day, on the surface of the earth, he causes people to think they see a treasure before them, which vanishes when they would pick it up. At times, treasure is really found, but this is by the special grace of God. I never had any success in the mines, but such was God's will, and I am content.

Ores which appear as if they contain silver may actually contain arsenical-cobalt which is damaging to health. The name for the metal cobalt, which at that time was not known, comes from the German kobold, as it was believed goblins put it there to trick the miners, raising false hopes and damaging health. Luther in his table talk seems be referring to kobolds as the devil.

The following article in the Protestant Reformed Theological Journal reviews Luther's demonology and includes the following:

Luther was convinced, both on the basis of Scripture’s testimony and his own experience, that the devil and his hosts exhibit a real presence and exert an equally real influence on the world of human experience. Luther believed that there were male and female demons. He believed that there were goblins and ghosts, spectres and poltergeists, hags and witches. All of these not only had contact with the world of humans, but were able also, in negative and harmful ways, to impact the lives of men, women, and children. Haile observes,

Devils were in evidence everywhere. Luther’s sermons and private remarks are brimful of tales about that grim, mocking demon, a helpful but ever insolent servant. He was held responsible for pretty much every trivial inconvenience and monstrous evil in the world, from the sulphur taste clinging to certain beers, to the crazy carryings-on of the radical sects and the unspeakable perversions of the papacy.

,

“And though this world, with devils filled…” was not just a hypothetical possibility with Luther. It was the sober reality.

This refers to his hymn:

And were this world all devils o’er,

And watching to devour us,

We lay it not to heart so sore;

Not they can overpower us.

It seems then that Luther probably believed in these creatures as some form of demonic manifestation.