I had this problem but I solved it by installing the version of the ruby that is specified in my gem file using the RVM
rvm install (ruby version)
After the installation, I use the following command to use the the version that you installed.
rvm --default use (ruby version)
You have to install bundler by using the following command in order to use the latest version
gem install bundler
After the above steps, you can now run following command to install the gems specified on the gemfile
bundle install