DIAGNOSIS That's mechanical failure, likely in the impact mechanism (hammer and anvil) or a bearing. Debris or a broken component is causing the metal-on-metal grinding.
FIX Stop using it immediately to prevent further damage. Remove the battery. The first thing to check is the collet and bit. Remove the bit and inspect for a broken bit shank or debris lodged inside. Reinsert a fresh bit and see if the noise persists.
IF THAT DIDN'T WORK The noise is internal. The grease in the impact mechanism can degrade or get contaminated, or a component has worn out. This requires disassembly by a qualified technician.
HEADS UP Continuing to run a tool with this noise will turn a simple rebuild into a much more expensive repair, potentially requiring a full gearcase replacement.