sometimes it is just easier to re-draw the image from scratch than it is to try and trace it.
This is one of those times. The picture is not clear enough and the image is quite simple that it would only take a couple minutes to just draw it.
Here is how I would do it. I use Corel Draw but from what I have heard, it is quite similar to Inkscape so you could probably do the same steps.
1) Open an new blank drawing in Corel Draw.
2) Import the picture into Corel.
3) Use the Freehand drawing tool. This tool is unique because if you click and hold the left button, it will draw a line like a trace.....but that is not what I do because the lines are never any good and it is very tedious. Instead, use the single click to draw straight lines. But the image is curved? No worry and trust me, this is the fastest way.
Start at the tip of the knife, click to start your line and then go to the next tip underneath. Double click to set the first line and then to continue to the next point, which would be the second point under the knife (see 1st attached image). Do this until you come all the way around the knife to the starting point again, then click on the same point and it should close the object.
redraw-image1.jpg
4) Once you have drawn all the way around, then convert all segments to curves by selecting the NODE tool and then drawing around the entire object to select all nodes. Once all are selected, then click the "Convert to Curves" icon on the top menu bar (see drawing 2 below)
redraw-image2.jpg
5) Now you can start to adjust all your lines to match up with the object. First click off the object to un-select all nodes, then select the middle of one segment and bend it into place so that it is directly over your drawing. Do this for each segment until it fits perfectly. You can also adjust the individual arrows on each node for custom bends or fine tuning each arc (see drawing 3 below). You can also click on the individual node and adjust it as necessary. You can also use the icon's on the top menu bar (next to the "convert to curves" icon) to change the behavior of the nodes, for example: to make your circle around the end smoother and less jaggedy, use the "Smooth Node" or "Symmetrical node" icons.
redraw-image3.jpg
6) Use the circle tool to draw the circle, resize as necessary (see drawing 4 below).
redraw-image4.jpg
7) Delete the original image, leaving the vector drawing, then size it to the size desired, export to DXF and cut.
Hope this helps.