The clouds represent the illusion or dream that's born of the ideal. Note the phrasing in which the stuff of the mountains literally turns into the clouds -- the illusion is made of the ideal, but at the same time the illusion obscures the ideal, and even annihilates it ("the Cordillera is gone from you"). In other words, idealism betrays the ideal: this is a central theme of the novel, symbolically illustrated here.
Throughout this passage the clouds are opposed by sunlight, representing idealism
in never-ending conflict with reality (or, literally, disillusionment). Idealism
is an illusory construct, and where reality intrudes, it vanishes "into
thin air." Again "the middle of the gulf" is mentioned, symbolically
the place of ultimate disillusionment; it is this place which the dream-ideal
"always strives for."