Rear axle grinding noise on fourtrak

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I recently bought a 1988 Fourtrak EL TD. It drives well, but does a horrible grinding noise when slowing down. It does it whether in gear, neutral, braking, clutch depressed... always.
I have tried driving the car in 4WD, and the noise disappears, however when I switch back to 2WD it comes back.

Any idea what this might be?