By 1938 Gracie was popular in every medium of entertainment.  She toured America, Canada and South Africa. After making her 1939 film 'Shipyard Sally' she became dangerously ill with cancer of the cervix.  The newspapers and radio soon made the public aware of her situation.  Never before had such adulation and concern been shown to a star, and Gracie received over 250, 000 letters and telegrams form her admirers from all over the world.  After the operation she went to her estate at Capri (which she had bought in 1933) to recuperate with her companion Mary Davey and film director Monty Banks (who as the public and press commented seemed to be her constant companion).  Shortly after her arrival in Capri war was declared.  Gracie wanted to do her bit and went with Arthur Askey to entertain the British Expeditionary Force troops in France.  This was quite an undertaking for a still very sick woman.  Throughout the war she gave unstintingly of her time visiting every war-zone in Europe and the Middle and Far East. 

In 1940 Gracie and Monty Banks decided to marry. They had become very fond of each other and the ceremony took place in Los Angeles.  In June 1940 Italy entered the war on the side of Germany. This created a great dilemma for Gracie and her new husband Monty, as he was Italian and threatened internment as an enemy alien. To avoid this situation and to protect her marriage she took up the offer of a series of concerts in Canada and America.  Suddenly the British press started a campaign of vilification against her, accusing her of being a traitor, of taking all her money out of Britain and running away at a time of war.  None of this was true however as Winston Churchill told her she could do more good for the war effort in the USA than she could do in Great Britain.  However the whole episode had a very hurtful and lasting impression on Gracie and some of her public turned against her.  In spite of this she made over $500,000 for the British war effort and returned twice to the United Kingdom.  In 1941 and again in 1943, giving concerts in factories and works canteens always to rapturous audiences wherever she went, to help the war effort, as she was a very patriotic woman.