He is sitting in his shorts, having forgotten to wear his clothes, and immediately gets into a fight with Natsu.  He stops when Makarov orders them to do so and he gets scolded by him about his accidental nudity during his missions. 
Gray finds out the reward for Natsu’s latest mission and he quietly wishes him luck, saying things were going to be interesting.  Later, he is attacked by Natsu while he is coming back from a job, finding out that Natsu and Lucy are also returning from a job and their paths just happened to cross. He tells Natsu, Lucy, and Happy that Erza Scarlet was coming back, making them uneasy. They bushed by a band of Mages that kidnap Happy and plan to eat him. The team manages to defeat them and rescue Happy, when they hear one of the defeated Mages mention “Lullaby.” 
As Gray is about to get into a fight with Natsu yet again, hearing about Erza’s arrival from Loke makes him stop.  Later, he is forced to go on a mission with Erza along with Natsu, Happy, and Lucy, much to his chagrin.  On their way to their mission, he shows Lucy his abilities as an Ice-Make Mage. Lucy then mentions that Gray’s ice abilities and Natsu’s fire abilities are probably what causes their quarrels. 
When they get off the train, they continue to discuss the mission, only to realize that they forgot to bring the motion-sick Natsu with them.  After they are reunited with Natsu, they learn that Natsu had a confrontation in the train with a member of Eisenwald, Kageyama. Natsu states that he had a strange kind of flute with three eyes and a skull. Lucy then pipes in, saying that she had only heard about it in books, but that it might be “Lullaby,” the flute of death. 
Eisenwald takes over the Oshibana train station, forcing the five of them to make their way in, quickly encountering Eisenwald’s Mages and fighting them.  Erigor, the Ace of Eisenwald, however, has other plans and flees the scene with Gray and Natsu in hot pursuit.  However, the two decide to split up and Gray runs into one of Eisenwald’s elite members, Rayule. 
While the two are fighting, Gray learns about the plan to kill all the guild masters who are at their regular meeting. Gray promptly freezes Rayule’s face, ending their fight.  He then informs Erza of this and they go to find Kageyama, so he can dispel Erigor’s wind wall.  Kageyama, however, is stabbed in the back by Karacka, a fellow Eisenwald guild member, before he can help them. 
After Lucy summons her new Celestial Spirit, Virgo, Gray compliments Virgo for being cute and as they escape, Gray is the only one to notice that Virgo and Lucy’s skirts are flying up due to the wind. They then realize https://installmentloansindiana.com/cities/lagrange/ that Natsu and Happy are missing again.  As they chase Natsu and Happy with the injured Kageyama, Gray gives him a speech about life and death, but the atmosphere is ruined when Lucy yells at Gray, asking him to kill Kageyama after he harasses her. 
They catch up to Natsu and Happy, only to see that Natsu has beaten Erigor. Gray, as usual, insults Natsu for having difficulties in the battle and insults him for his choice of clothes. As Erza congratulates the group for a job well done, Kageyama grabs the Lullaby flute and uses the Magic Four Wheel Drive to get to Clover Town, much to everyone’s surprise.  Chasing after him, they arrive and see Kageyama with Makarov, and are about to go to their master’s aid, but are stopped by guild masters Bob and Goldmine. They then see that Makarov has persuaded Kageyama not to use the Lullaby’s Magic. Suddenly, the flute itself starts to talk and transforms into a giant demon.