Up against Euan Bowden of The Glen, he was two up with two holes to play but lost the short 17th to a par and then the 18th to another par after visiting "The Graves" off the tee.
The momentum looked to be with Bowden as they headed back down to the first tee but Gaughan won the 19th with a par to set up a second-round clash tonight with Liberton's Anthony Blaney.
In another close encounter, Blaney went one up when his opponent, Bathgate's Ryan Boyle, discovered he'd played the wrong ball from through the back of the 17th green.
Fuelled by anger no doubt, Boyle then made amends by driving the last to win that with a birdie-3 but, after they'd halved the first extra hole, Blaney hit a majestic approach to four feet at the 20th to win that with a birdie.
Defending champion Simon Fairburn also went through but he certainly didn't get things all his own way against Craigielaw clubmate Euan Mackay, though he entered this event out of Torphin Hill.
Helped by the fact he holed his second shot for an eagle at the sixth, Fairburn was two up early on but Mackay then edged ahead by winning three holes in a row from the eighth.
Fairburn, though, was back in front after the 16th and held on for a one-hole win, earning him a second-round clash with Bathgate's Greg Miller, who beat Liberton's Ross Munro 3 and 2 to reach that stage.
West Linton's Fraser Thain won by the same margin against Blair Todd of Greenburn and now meets Newbattle's Lee Morgan, who accounted for Thain's clubmate, Sean Walter, on the last green.
In tonight's other second-round clash, Longniddry's Michael Bacigalupo, who was always in control as he beat Alexander Wilson of Gullane, takes on Ewen Donaldson of Craigielaw.
Donaldson was one down with two holes to play against Tantallon's Alasdair Simpson but squeezed through at the 19th.