How to diagnose and fix "password authentication failed for user postgres"?

i am trying to run rake db:create db:migrate db:seed inside a ruby on rails project, i get an error saying FATAL: password authentication failed for user "postgres"

Looking at other similar questions, a lot of people pointed out the validity bug in the pg_hba file, but as far as i can tell, there is no issue with it?

local   all             postgres                                md5    
# TYPE  DATABASE        USER            ADDRESS                 METHOD
# "local" is for Unix domain socket connections only
local   all             all                                     peer
# IPv4 local connections:
host    all             all             127.0.0.1/32            md5
# IPv6 local connections:
host    all             all             ::1/128                 md5
# Allow replication connections from localhost, by a user with the
# replication privilege.
#local   replication     postgres                                peer
#host    replication     postgres        127.0.0.1/32            md5
#host    replication     postgres        ::1/128                 md5

I also ran into this sudo -u postgres psql -x -c "select * from pg_user where usename='pand got the following:

-[ RECORD 1 ]---------
usename     | postgres
usesysid    | 10
usecreatedb | t
usesuper    | t
usecatupd   | t
userepl     | t
passwd      | ********
valuntil    | 
useconfig   | 

more info : System Ubuntu 14.04 running in a vagrant box, with postgres v9.3.