[William Cloud Hicklin]

Actually Tolkien here as so often was using a word in its older sense: cousin meant generically "kinsman," without implying a particular relationship. (So also did 'nephew', which meant only younger male relative- hence T's preference for the more specific 'sister-son.')

Of course, externally it's the case that when T wrote the passage he had no idea that Gandalf was anything other than a Man with magical abilities.