A tug-of-war between club and country looks to be developing for the Swiss talent who recently signed for Bundesliga side Borussia Monchengladbach from Basel
Knabel is hopeful Monchengladbach coach Lucien Favre will release the youngster to play at London 2012, despite the club's involvement in the Champions League preliminary qualifying stages.
"For the first time in 84 years, Switzerland is back in the Olypmic games," Knabel told Sports Bild. "We naturally want to be at this very important event for Swiss football with the strongest available players.
"The talks with Favre have been very amicable. We hope for a definitive arrangement [for Xhaka to play at the Olympics] by next week."
The Swiss talent recently signed for the Bundesliga outfit from Swiss Super League champions Basel, a move Knabel is confident will pay dividends for Xhaka's career.
"Xhaka may only be 19-years-old, but he is already mature enough to take responsibility," Knabel continued.
"Monchengladbach presents the right conditions for his next step. Favre is excellent at coaching young players, and will help Xhaka in his next career step."
Current Swiss internationals Gokhan Inler and Blerim Dzemaili made their national team debuts under the 54-year-old former midfielder.