Fire agate's iridescence is not colour in the ordinary sense. There is no red or green pigment in the stone, and what the eye sees is an interference effect.
Within the chalcedony lie extremely thin, closely spaced layers of iron oxide, usually limonite or goethite, deposited as the silica grew in botryoidal, grape-like masses. Light reflecting from the top of such a layer interferes with light reflecting from the bottom of it. Where the two are in phase, a wavelength is reinforced; where they are out of phase, it cancels. The colour seen therefore depends on the thickness of the film and on the angle of view, and it moves as the stone is turned. Thin-film interference is the same mechanism that colours a soap bubble, an oil slick and the wing of a beetle.
This makes fire agate exceptionally difficult to cut, and the difficulty is the reason good pieces are expensive. The fire lies at a specific depth beneath the surface, following the bumpy contours of the original growth. The cutter must grind down to that layer and no further, following the undulations rather than imposing a shape, because cutting through the layer destroys the effect permanently. Fire agate is therefore carved to a free form dictated by the stone, and two are never alike.
The material occurs in a limited area of the southwestern United States and northern Mexico, in Arizona, California and Chihuahua, associated with Tertiary volcanic rocks. It was not described until the twentieth century and carries no traditional attributions from anywhere.