Oh, one thing first - if you are bothered,
Gil-Galad, you don't have to put the exegesis in here, only if you wanted me to show you on this why your answer is wrong - it would be a bonus for you, not for me, since you could possibly learn from the mistakes you made. And I could also get a better picture of what you are stuck at if I wanted to post a hint.
Second, you made another valiant attempt, but again, sorry, Sauron is not the right answer. I think the error you made in both your guesses was not to take the riddle as a whole. If you rewrite it into prose, these are actual sentences spoken out by the "answer". I might include a hint in this place - the "answer" talks to "you": and this "you" is the same "you" in the whole riddle. Thus, if, according to your second explanation, "your friend is now lost" would mean Sauron as Aulė's friend, then e.g. the line "you'll beat me, I know" would also have to refer to Aulė. And as far as we know, it was not Aulė who has beaten Sauron (not even during the War of Wrath).
Anyway, keep trying, the riddle, in the end, is not very hard... or at least I think so
