The former England international looked set for a permanent switch to Elland Road after a loan spell but sources at Leeds now claim that now looks 'highly unlikely'.
Gray played a total of 10 games for the Whites during the second half of last season and appeared to impressed everyone.
But any hopes of a permanent signing now look to be fading because Kevin Blackwell cannot afford his wages, even if he was to take a pay-cut.
Gray now faces the prospect of reporting back for pre-season training at Blackburn, where his hopes of regaining a regular first-team place look unlikely.
The former Sunderland captain only started five games under Rovers boss Mark Hughes before he was sent out on loan.