It is a code violation to use a gray wire for ground. Gray is for neutral only.
OF COURSE it’s a code violation, but the color of the wire doesn’t change the electrical function of the wire.
But there are a lot of problems created by people doing things their own way, because they’ll just know. There’s a reason for codes dictating things like the color of wire insulation.
If that grey wire goes back to the panel with the mains breaker it will most likely be bonded to the ground bus and the panel enclosure. The best way to check this is to take an ohm reading from the grey wire to the conduit. If it’s zero then the wire and the conduit are bonded to the system. You can take a ground pigtail from the box to the device/appliance. Personally, I would either pull a new ground back to the panel, or wrap green tape around both ends of the grey wire and call it a day. A #10 wire is sufficient for this application (good up to 60 amps - for equipment ground). I dont like to use the conduit as a ground due to locknuts and fittings loosening up over time. You might have a ground today and not have one next week…
Not a good idea at all for the same reason as copper water pipes are no longer considered suitable. Both can be replaced in whole or in part by non-conductive plastic.