Website IFL Science says the arc occurs when the sun has risen higher than 58 degrees in the sky, which is most common over summer.
"Aside from the position of the sun, the other ingredient to forming circumhorizontal arcs is cirrus clouds. Cirrus clouds are the thin, wispy clouds that occur at higher altitudes. Because the temperature is so low where these clouds exist, they are made of ice crystals."
The plate-like crystals then act like prisms and refract light to create the rainbow and so are sometimes called "fire rainbows".