Gnomes are, despite appearing humanoid, are technically giant bugs. They got antennae, lay eggs, and have a larval stage that looks way more bug-like than their more matured stage.
They have sex like the rest of us. But unlike us gnomes lay eggs. They start off weird and soft, like snake eggs, but the exterior soon hardens into a crystalline material. From the moment they are laid, the mother is hard-wired to never leave her eggs until they hatch, even if it means death. Soon enough, the larva is ready to hatch, and breaks through the crystal-like shell. These larvae are not humanoid at all, instead looking like bugs. They're not homestuck troll-style grubs with normal heads on bug bodies or whatever the fuck1. They are all bug.
When these bugs are freshly hatched, their bodies are a multitude of seemingly random colors, and seemingly random transitions between these colors. You might have a smooth gradient from red to yellow, you might have a (proportionally) large green patch with an off-center pink splotch. These little bugs will eat anything they can get their proverbial hands on, favoring sugars the most.2 They grow incredibly quickly, and during this time the rainbow of colors on their bodies will fade into just one definite color.
A gnome larva pupates after [TIME TBD] after growing to be about [SIZE TBD], making a god damned cocoon I guess and staying in their for a while before coming out looking far more humanoid. If it weren't for their brightly colored skin (the same shade they were before pupating) and antennae, you'd never even know they were ever a weird colorful caterpillar grub thingy. Soon after pupating, a gnome's brightly colored skin will fade to reveal a normal human skin tone. Though it is not uncommon for mild undertones of the previous color to remain. A gnome will continue to grow for some time after this until complete adulthood, typically reaching a height between approximatedly 3 to 4 feet, or about 90 to 120 centimeters.
It was mentioned earlier that larval gnomes appear to be a multitude of bright colors, which fade into one solid color before fading again into a skin tone that's actually humanly possible. What determines these colors?
The colors seen immediately after hatching are caused by a large number of difficult-to-control factors. For example, atmospheric magic levels3, the mother's general disposition, genetics, the mood and magical capability of anyone who happens to come near the eggs, temperature, humidity, elevation, some amount random chance, and much more.
Many of these same factors determine what single color ultimately dominates, with additions such as the larva's disposition, diet, how much attention they get, and much much more. Interestingly, there have been rare cases of a larval gnome having two colors before pupating. Three or more is believed to be possible, but would be extremely unlikely.
The final, definite skin tone is purely genetic, barring any possible undertones of the previous color. It's the same as human skin tones.