The Reds are fresh from their Europa League last-16 triumph over Manchester United following Thursday’s 1-1 draw at Old Trafford.
Liverpool have already beaten Southampton twice this season, including a 6-1 win at St Mary’s in the League Cup quarter-final in December.
Southampton were 2-1 winners against Mark Hughes’s Stoke City side last time out and are unbeaten in their last two Premier League games.
Former Aston Villa and Everton forward Gray believes the Saints will have too much for Jurgen Klopp’s side in Sunday’s game.
“Liverpool already beat Southampton this year in the cup 6-1 and it was absolutely brutal for Ronald Koeman,” Gray told Paddy Power’s blog.
“The Saints weren’t marching anywhere at that stage, but they are now. They’re much more difficult to beat now. The result at Stoke proved that. In the last 10 games, they’v only lost twice in the league.
“I think Jurgen Klopp might rest a couple of starters after the match on Thursday, and because of that, I’m backing Southampton. That might be unpopular with Paddy’s punters!”
Liverpool drew 1-1 with United after Philippe Coutinho cancelled out Anthony Martial’s goal at Old Trafford.
The Reds are unbeaten in their last four games in all competitions since Liverpool lost to Manchester City in the League Cup final at Wembley after a dramatic penalty shootout.
Get 8/1 enhanced odds on Tottenham to win or 11/1 enhanced odds on Liverpool to win at White Hart Lane on Saturday afternoon. Click here to sign up now. T&Cs apply.
MORE: Latest Man Utd news
MORE: Latest Arsenal news
MORE: The latest football news