WeatherTalk: If it isn't a rainbow, it might be iridescence
Cloud iridescence is most common in thin clouds made of tiny water droplets.
FARGO — Sometimes, you may look up to the sky and see a rainbow in a cloud, but there is no rain around. Likely what you are seeing is a type of atmospheric optical phenomenon known as cloud iridescence. Rainbows form due to diffraction from many small water droplets that individually scatter light. This is why we commonly see rainbows in the vicinity of a rain shower. This same science occurs in a cloud that is showing cloud iridescence.
Clouds that are made of liquid water droplets roughly the same size, high in the sky and are relatively thin, are optimal candidates for the cloud iridescence to occur within them. This phenomenon can also occur with clouds made of ice crystals, although it is more rare. Due to this phenomenon occurring in clouds that are relatively thin, this illusion only happens when clouds are just forming or in a cloud that is nearly transparent.