Here's the emedals one if that's what we're talking about.
We have no photos of the cloth Fleet badge in wear like we do for the U-Boat, Destroyer and Minesweeper cloth badges, so without provenance we can't be 100% sure, but at least the construction is "wartime-compatible". This is, at any rate, the type with the best chance for being wartime and they appear few and far between.
It wasn't so long before the wear of cloth badges in wartime was expressly forbidden by regulation, which may explain why it's hard to find the later badges. And perhaps harder to get away with it on the capital ships than on a sub or a minesweeper?
Why were cloth badges not allowed to be worn in wartime? I've not heard that before.
The Fleet Badge was established by announcement on April 30, 1941 and the final design of the metal badge wasn't published in Uniformen-Markt until October 1, 1941.
Meanwhile, as early as June 1, 1941, cloth badges were already forbidden (as seen in the first attachment). Obviously that warning was ignored and the rules had to be restated in 1942 (second attachment).
There was a window of opportunity for allowable wear of the U-Boat, Destroyer and Minesweeper badges in cloth before they were forbidden, but as you can see, cloth KM badges were already not permitted by the time the Fleet badge was in production (and likewise the S-Boat and Auxiliary Cruiser badges).
BTW, the same type of cloth Fleet badge patch is seen in "The Kriegsmarine Awards", volume II on page 815 and page 846. The final two cloth patches in the same series as that Fleet badge patch are also shown: the 1st pattern S-Boat is on page 856 and the Auxiliary Cruiser on page 858.
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