The 18-year-old has been in sensational form for Birmingham, including a virtuoso display against Bolton last weekend which have led to comparisons to Liverpool and England ace Raheem Sterling.
Reports suggest that London rivals Arsenal and Tottenham are keen to land the England Under-19 international but Liverpool have a huge advantage over the London clubs after agreeing a right to match any offer from another side with Birmingham.
The deal was struck as one of the conditions for Liverpool sending Jordan Ibe to the Blues on loan last season.
Crystal Palace are also known to be interested in Gray and saw a £500,000 bid rejected over the summer.
But it seems that a move to the Premier League is only a matter of time, with Liverpool now firm favourites to seal a deal for a fee in the region of £2m.