Okay, I think we can all agree that by today's understanding of the term metal it wasn't a metal album....but it was back then and you can kind of understand the thinking of the Grammy judges, in that there are some true hard rock songs on there in the vein of Thin Lizzy, Dire Straits, Gary Moore, Robert Plant for example, and some killer metal guitar solos, "Steel Monkey", "Jump Start", "Budapest", "Mountain Men"
Also when it came out in 87, there were plenty of other albums in a similar vein being released by so-called heavy metal bands that were of a similar heaviness or in fact even lighter than Crest of a Knave, for example from most of the hair metal bands Europe, Bon Jovi, Whitesnake etc., plus bands like Guns n Roses, Motley Crue etc.
Steel Monkey for example is heavier than anything Whitesnake, Queen or Nazareth ever recorded.
So in the light of what was being called metal (especially in the UK) back then, it really isn't a stretch to think of the Dire Straits/Thin Lizzy inspired Crest of a Knave as a heavy metal (1987 definition) album.
Also, in light of some of the prog-metal being released in the 90s and 00s - Threshold, Everon, OSI, Opeth it becomes very easy to view it as a prog-metal album.
If you forget about genres for a second and forget that it is Jethro Tull and just compare the music on CoaK with the music of 80s hard rock/metal bands and with the music of 90s/00s prog-metal albums it becomes even easier again to understand how the Grammy judges were thinking.
In conclusion, one of my favourite JT albums, "folkprogmetal", as Ian Anderson recently referred to his new solo stuff.
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