BMW Repair: Low Pitched Loud Squeak During Acceleration, sway bar, diagnostic report

Question
QUESTION: Its a 2001 325xi. This has been a problem for quite a while now (6 months). When I accelerate I get a Loud deep squeak (sounds like metal on metal) that lasts for about a second. It sounds like its coming from up front. I can't say its always at gear change but it usually close to the gear change (1st gear in steptronic) (its an auto).... in the most recent case I heard the squeak and a slight grinding (worst its been). It usually happens several times a week, but it's becoming much more frequent. I'm kind of suspicious it might be the transmission or differential but I'm not sure. However the transmission is always really smooth except when this happens. I just brought my car in for service 3 weeks ago and they were unable to verify it. The dealer also gave me 10 page diagnostic report covering several aspects of the car... They did warn me of some cautionary things that will eventually need replacement such as the vanos hose, power steering hoses, oil gasket cover, air filter and sway bar... but nothing about transmission or anything like that. Also it is an XI... could it have something to do with the x-drive?

This person posted a video about their 2000 323ci.... This noise happens when they are decelerating, sounds the same especially at 0:12 and 0:20

http://www.youtube.com/watch?v=wPdLV3Zpy0E

ANSWER: Has the fluid levels been checked?The car being an Xi does have a transfer case.Check the levels,

---------- FOLLOW-UP ----------

QUESTION: I talked to the service adviser at the dealer. She believes its the transmission. She didn't mention anything about checking the transmission fluid... She told my a squeak at gear change is a sign the transmission is starting to wear and that I shouldn't concerned until I start hearing a grind. If the transmission does go I have decided that I will likely trade it in for a newer model. My question is approximately how much time, if in fact it is the transmission does it have left? Because If I am going to trade it in I want to make sure trade it in before the transmission completely fails so I could get the maximum trade-in value. Also could the noise at gear change be anything else other than the transmission. It just seems like 63,500 is such low mileage for a transmission failure.

Answer
That answer from the dealer sounds rather odd to me.If the squeak is heard than there is a problem.The AWD of the newer 'XI's" I don't know much about. The older and first AWD ( I have one)has transfer case where the fluid is checked. They use a "viscous" coupling which uses a fluid to "distribute" the awd mode.They often were never checked at Pre delivery when the vehicle was set up at the dealer.I would still ask about it I haven't seen one yet :)