Yes, you can absolutely install our Kontakt libraries on an external hard drive. We recommend first downloading the library folder onto your desktop and then moving it to your drive instead of downloading to the drive via Hub, as we've found this reduces potential download complications.
However, if you already added the library in Kontakt then Kontakt is going to continue to use the library's current location as a point of reference to access the library's files when needed. If you wish to change this location, please reference this knowledge base article.
*NOTE: Our plugin, MOVEMENT, must be installed on the system drive.