Try restarting XCode. I know, it sounds like something straight out of "The IT crowd" (Have you tried turning it off and on again??!), but it worked for me. Not only for this error, but other XCode-related errors as well.

Wow, just had this problem, and only "Cancel" or "Allow". Tried the user password multiple times, then all other old/possible passwords I could think of. Finally I tried with an empty password - and that was it. Dear Apple engineers - why would you ask for a password if none is set? SMH...