securing access to a folder - 404 error

[mottwsc]

I'm trying to secure a directory on a CentOS 6.3 64 server running NGINX
1.2.7.  I think I've set this up correctly, but it keeps giving me a 404 Not
Found error when I try to access a file in that folder in the browser using
domainName/secure/hello2.html.

I created an .htpasswd file using printf "MYUSER:$(openssl passwd -1
MYPASSWORD)\n" >> .htpasswd
and put that into the /var/www/protected/ folder.

I also modified the NGINX config file and included a location/auth block for
the /secure/ folder:

# protect the "secure" folder ( /var/www/html/secure )
    location ^~ /secure/ {
        auth_basic "Restricted";
        auth_basic_user_file /var/www/protected/.htpasswd;
    }

If I comment out this block from the config file and restart NGINX, I can
see the file in the browser with no problem.  I even moved the .htpasswd
file into the /secure/ folder and changed the config file to reflect that
change (just to see what would happen), but I still get the 404 Not Found
error.  

Can anyone tell me what I'm missing?

Posted at Nginx Forum: http://forum.nginx.org/read.php?2,237196,237196#msg-237196