Next/Previous post goes to a 404

I have never had these links work smoothly for me. But in this instance, they go to a ‘404 error not found’ page on page 2. I am using /%category%/%postname%/ url structure. The url it tries to go to is https://blogaddress.com/blog/page/2/ which is where the error is.
This is the code I’m using:

<?php get_header(); ?>
	<div id="content" class="narrowcolumn">
	<?php
		$paged = (get_query_var('paged')) ? get_query_var('paged') : 1;
		query_posts("cat=3&showposts=1&paged=$paged");
	?>

	<?php if (have_posts()) : ?>
	<div id="lefttop"></div>

	<div id="blogpoint">
	<div id="leftcol">
		<?php while (have_posts()) : the_post(); ?>

			<div id="leftsquidge">
				<h2><a href="<?php the_permalink() ?>" rel="bookmark" title="Permanent Link to <?php the_title_attribute(); ?>"><?php the_title(); ?></a></h2><br /><br />

					<?php the_excerpt(); ?>
			</div>
			<div id="rightsquidge">
				<?php the_tags( '<p><strong>File under:</strong> ', ', ', '</p>'); ?>
				<?php the_time('F jS, Y') ?>  by <strong><?php the_author() ?></strong>
			</div>
			<div style="clear:both;"></div>
			<br /><br />
		<?php endwhile; ?>
		<div class="navigation"	style="padding:0px;margin:0px;">
			<div class="alignleft"><?php next_posts_link('&laquo; Older Entries') ?></div>
			<div class="alignright"><?php previous_posts_link('Newer Entries &raquo;') ?></div>
		</div>
	<?php endif; ?>
		<div style="clear:both;"></div>
		</div>

		</div>
		<div id="leftbot"></div>
	</div>

<?php get_sidebar(); ?>

<?php get_footer(); ?>

I had a search around and i cannot find anyone else who has had this problem. Does anyone know what I am doing wrong?