I remember running into some sort of issue as well.

Chiming in with Reza, here's my `~/.gnupg/gpg-agent.conf` file:

    allow-loopback-pinentry

And my `~/.gnupg/gpg.conf` file:

    use-agent
    pinentry-mode loopback

The result is a prompt for my password directly in the terminal. Hope this 
helps.

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