Most governments' bond in developed countries were considered risk free assets. No more. Right now, only Germany, U.S. Canada, Aussie Japan and U.K's bond are considered risk free. However, you still face currency devaluation among these countries because of potential money printing. That's probably the most important reason why gold is up so much.
The dry out of funding to European countries ex Germany has made the financial market very volatile. The valuation matrix is confused because the risk-free rates are changing rapidly. If you can buy government Italy bond at over 7%, how much you will demand to own Italy corporation bonds? The required return on equity will be at least 12%. That's the challenge the market faces.
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