knocking noise coming from what appears to be the case. help

1.6 carb engine in an 86 mk1 karmen cabrio.
The noise started out gradually over the last few weeks and has got alot worse. Before i revved the engine and it dissapeared but now the noise is constant. It drives fine plenty of power their. the noise sounds like knocking maybe small amount of grinding. theres water in the expansion tank and its not running low on oil.

a bit worried that this might be the cambelt? an ideas. i have just converted from aircooled to watercooled and so learning curve for me!

Thanks everyone.

phil