The noise is created by the ZF internal clutch packs grabbing just a fraction of a second too long during shifts. The friction modifiers in your ATF are worn out and that is what causes the issue. The fix is indeed an ATF drain-and-fill. Plenty of threads here on the forum confirming that, and so do I. It immediately silenced my wife's 2006 XK8's squawk when we did a ZF drain-and-fill back in July 2013....

There are several ATFs other than Lifeguard 6 that meet the required Shell M1375.4 specs. Do your research, pick an ATF, and do a ZF drain-and-fill. You'll then enjoy silent shifts again (as well as a longer-lasting transmission)....

 

Does the noise typically come from the rear end of the car though, unless it's travelling down the prop shaft.......

 

The noise manifests itself in different areas in different cars. Do not be fooled by where you THINK you are hearing the noise. In my wife's XK8's case, the noise sounded as if it was coming from the rear axle. I knew from experience that it was indeed the infamous ZF squawk....

Last time I'll say it - Do a ZF drain-and-fill. You're just wasting time and brainpower until you do....

 

Ok then fair enough, I'll get it booked in tomorrow, thanks for you help