PG::ConnectionBad: fe_sendauth: no password supplied

localhost as a host refers to a TCP connection, which means the auth method is md5 (password required) per your pg_hba.conf:

# IPv4 local connections:
host    all             all             127.0.0.1/32            md5
# IPv6 local connections:
host    all             all             ::1/128                 md5

For the peer method to be taken, you’d need to connect through Unix domain sockets, and since you seem to be using a debian-like OS, that means putting /var/run/postgresql in the host field, or nothing at all (it’s the default unless environment variables say otherwise).

EDIT: if using database URIs (supported since Rails-4.1, as announced in http://weblog.rubyonrails.org/2014/4/8/Rails-4-1/), the syntax could be:

• for localhost:
  test: "postgresql://localhost/myapp_test"
• for the default Unix socket domain (host field left empty):
  test: "postgresql:///myapp_test"