Custom type post loop problem

I have set up a custom post type “sagi” and I’m trying to get the post to display on example.com/sagi/ using the following code, but the “« Older Entries” link goes to example.com/sagi/page/2 which does not exist so it brings up the 404, Is there anything that can be done about this or can I only show the 10 latest posts on a page?

<?php

/*
Template Name: SaGi
*/

get_header(); ?>
<?php
$paged = (get_query_var('paged')) ? get_query_var('paged') : 1;
query_posts('paged=' . $paged . '&post_type=sagi');
?>
<?php if (have_posts()) : ?>
<?php while (have_posts()) : the_post(); ?>
<h2><a href="<?php the_permalink() ?>"><?php the_title(); ?></a></h2>
<?php the_content(); ?>
<?php endwhile; ?>

<?php next_posts_link('&laquo; Older Entries') ?>
<?php previous_posts_link('Newer Entries &raquo;') ?>

<?php else : ?>
<?php endif; ?>
<?php

wp_reset_query();
?>
<?php get_footer(); ?>