But - if the rainbow-like colors are randomly distributed, and if the sun is nearby in the sky - what you're seeing is likely an iridescent cloud.. Ever noticed clouds that seem to display faint rainbow colors? Those are iridescent clouds, and they offer a glimpse into a cool interaction between light and tiny water droplets or ice crystals in the sky. But unlike a rainbow, which requires rain and sunlight, iridescent clouds reveal their beauty through a different atmospheric phenomenon: diffraction. This article by thedailyECO explains.

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Cloud iridescence is a rare optical phenomenon in which sunlight interacts with tiny particles in clouds, creating rainbow-like colors that turn the sky into a striking display. A rainbow cloud can occur because of something called cloud iridescence. It usually happens in altocumulus, cirrocumulus, lenticular and cirrus clouds. Iridescent clouds happen because of diffraction - a phenomenon that occurs when small water droplets or small ice crystals scatter the sun's light.