The Elder Shade appears just outside of the "Metal Demon" after the Wolf finds two out of the three parts needed to turn it on fully. He starts out accusing the Wolf of being a murderer because he was hunting down one who consorted with Them. He also goes on saying that the one who murdered the girl's father was not a demon, but another human. He takes interest in the Hammer being carried by the Wolf, and in exchange for the final missing part, takes the Hammer as he sees the Wolf unworthy of wielding it.
He reappears in the Spirit World, continuing to act hostile towards the Wolf, stating that he and his protective ward continue to grow weaker the further they go into the Spirit World. Nonetheless, he leaves after a brief conversation with him.
The Elder Shade very closely resembles a Fithling, although this may be purely coincidental.