In fact, all gem-related commands result in the same error message, when run from inside the existing rails app I cloned from a git repo.
$ bundle install Could
I had this problem. Once I did:
[root@smaug ~]# PATH=$PATH:~/.gem/ruby/2.0.0/bin
[root@smaug ~]# export PATH
Then it was fixed and I could just
[root@smaug msf3]# bundle install
successfully.