I am getting this error after running sudo gem install rails

/System/Library/Frameworks/Ruby.framework/Versions/1.8/usr/bin/ruby extconf.rb
creating Makefile

make
xcrun cc -I. -    I/System/Library/Frameworks/Ruby.framework/Versions/1.8/usr/lib/ruby/1.8/universal-darwin12.0     -I/System/Library/Frameworks/Ruby.framework/Versions/1.8/usr/lib/ruby/1.8/universal-darwin12.0     -I. -DJSON_GENERATOR  -D_XOPEN_SOURCE -D_DARWIN_C_SOURCE   -fno-common -arch i386 -arch x86_64     -g -O3 -pipe -fno-common -DENABLE_DTRACE  -fno-common  -pipe -fno-common   -c generator.c
xcrun: Error: failed to exec real xcrun. (No such file or directory)
cc -arch i386 -arch x86_64 -pipe -bundle -undefined dynamic_lookup -o generator.bundle     generator.o -L. -L/System/Library/Frameworks/Ruby.framework/Versions/1.8/usr/lib -L. -arch      i386 -arch x86_64     -lruby  -lpthread -ldl -lobjc  
i686-apple-darwin11-llvm-gcc-4.2: generator.o: No such file or directory
i686-apple-darwin11-llvm-gcc-4.2: generator.o: No such file or directory
lipo: can't figure out the architecture type of: /var/tmp//ccHCNNwM.out
make: *** [generator.bundle] Error 1

I have Homebrew installed, Xcode 4.4 with command line tools installed, Osx 10.6.2

I run gem env and get this but not sure what I'm looking for:

RubyGems Environment:
 - RUBYGEMS VERSION: 1.8.24
 - RUBY VERSION: 1.8.7 (2012-02-08 patchlevel 358) [universal-darwin12.0]
 - INSTALLATION DIRECTORY: /Library/Ruby/Gems/1.8
 - RUBY EXECUTABLE: /System/Library/Frameworks/Ruby.framework/Versions/1.8/usr/bin/ruby
 - EXECUTABLE DIRECTORY: /usr/bin
- RUBYGEMS PLATFORMS:
 - ruby
 - universal-darwin-12
- GEM PATHS:
  - /Library/Ruby/Gems/1.8
  - /Users/matthewcleghorn/.gem/ruby/1.8
  - /System/Library/Frameworks/Ruby.framework/Versions/1.8/usr/lib/ruby/gems/1.8
- GEM CONFIGURATION:
  - :update_sources => true
  - :verbose => true
  - :benchmark => false
  - :backtrace => false
  - :bulk_threshold => 1000
- REMOTE SOURCES:
  - http://rubygems.org/

Any help greatly appreciated. Thanks.