Static file serving only works if root is a subfolder under public

I am trying to serve static cache files using nginx. There are index.html files under the rails_root/public/cache directory. I tried the following configuration first, which doesn't work:

root <%= current_path %>/public;
try_files /cache$uri/index.html /cache$uri.html @rails;

This give error:

[error] 4056#0: *13503414 directory index of "(...)current/public/" is forbidden, request: "GET / HTTP/1.1"

I then tried

root <%= current_path %>/public/cache;
try_files $uri/index.html $uri.html @rails;

And to my surprise this works. Why is it that I can do the latter not the former( since they point to the same location)

Permissions of file system

The permissions of the folders are:

775 public
  755 cache
    644 index.html

Rails sits in the user ~ directory, so the folders and files are all belong to the user good. The user for nginx is root for master and http for each worker processors:

89:http      7865  0.1  0.0   8876  2624 ?        S    Jul10   0:51 nginx: worker process                        
112:root     24927  0.0  0.0   8532  1828 ?        Ss   Jun28   0:03 nginx: master process /usr/sbin/nginx -c /etc/nginx/conf/nginx.conf

My favicon is sitting under public/ is served correctly by the following:

# asset server
server {
  listen 80;
  server_name assets.<%= server_name %>;
  expires max;
  add_header Cache-Control public;
  charset utf-8;
  root   <%= current_path %>/public;
}

LOG

For my working setup: access log shows:

request:"GET / HTTP/1.1" 200 uri:"/index.html"
request:"GET /assets/gas/468x15_4.gif HTTP/1.1" 200 uri:"/assets/gas/468x15_4.gif"

If I add index nonexistent the same directory index forbidden error would appear with following access log:

request:"GET / HTTP/1.1" 403 uri:"/"

error log:

directory index of "RAILS_ROOT/current/public/cache/gas/" is forbidden, client: _IP_, server: example.com, request: "GET / HTTP/1.1", host: "gas.example.com"

UPDATE

Please see the full config file. Note that it is complete and the example given above are a bit simplified.

I am using Nginx 1.22