Step 1

Open a new document in Photoshop (I will be using dimensions 600x600 px).

2. With your blank canvas open, select the Gradient tool.

Step 2

Open the Gradient Editor and set the gradient from Black to White (By default, the black to white gradient should be the square in the top left corner of the "Presets" section).

Step 3

Make sure the Mode is set to "Difference" and the Opacity is set to "70%"

Step 4

Now with the Gradient Tool, click and drag from the top left of the canvas to the bottom right. There should now be a gradient going from light to dark at a diagonal direction.

Step 5

Now with the Gradient Tool, click and drag from the lower right of the canvas to the top left.

Simply repeat steps 4 through 6 over and over again. What you will get are many different types of folds that look like fabric.

Step 6

Goto Image > Adjustments > Color Balance. Adjust the color sliders to give the fabric folds some color.