Backtrack

The problem is that the GEM_PATH isn't pointing to the location that ruby 1.9.2 is installing the gems into.

you can see the gem path by doing

ruby -r rubygems -e "p Gem.path"

and the path that a gem is installed into by doing

gem contents <gem name>

For my installation the gems are getting installed into /var/lib/gems/1.9.2/gems/ and the path in GEM_PATH is /usr/lib/ruby/gems/1.9.2

so my resolution was

cd /usr/lib/ruby

ln -s /var/lib/gems gems

which seems to work :)