You're getting contact with the fender when the spring compresses, the shocks if they are single acting they don't dampen when compressing...only when they rebound.
If what you have is an acceptable ride (not bone jarring) & the ride height is where you want it (even tho the fender is close to the tire), then what I suggest is a double acting shock that provides dampening in both directions.
Seeing as you have mounted coil-overs you may be able to find double acting shocks for that setup.