TEM and XRD results show that opals in palygorskite clay deposit at the border of Anhui and Jiangsu Provinces are opal-A and opal-CT. The palygorskite mineral deposit consists of palygorskite, opal-A, opal-CT, and small amount of dolomite. The fine grain minerals form sediment strata in a Tertiary terrestrial confined basin between two eruption cycles of basalt. These strata show oscillation of opal-A-rich and opal-CT-rich layers. Both opal-A and opal-CT exit in all the layers. Opal-A is a dominant opal mineral in palygorskite-rich layer. However, opal-CT is a dominant opal mineral in opal-rich layers. The thickness of the layers may vary in a range of several centimeters. All these minerals are authentic minerals that crystallized from solution of evaporating lake. It is proposed that components for the minerals (Si, Mg, Al) were supplied by shallow groundwater that is from surrounding basalt. Our results indicate that opal-CT is not a re-crystallization product of opal-A. Opal-CT-rich layers indicate periods of humid climate with high input of groundwater that is low in soluble components. However, opal-A-rich layers indicate periods of dry climate with low input of groundwater that contains high concentration of soluble components. The lake water with high concentration of soluble silica and other components favors the formation of opal-A and palygorskite. However, the lake water with low concentration of soluble silica and other components favors crystallization of opal-CT with small amount of palygorskite. So the formation of silica polymorphs is controlled by concentration of soluble silica in lake water that is mainly from groundwater. The oscillation of opal-A and opal-CT layers may be used as an indicator of paleoclimate and paleohydrology changes.