What area are you in, is it a 302 or a 351? Do you run the A/C and notice temp changes?
It could be related to sending unit or gauge, or most likely the thermostat. If you think it's a problem, the easiest solution is remove the t stat water neck and check to see that it's functioning properly. Also check the temperature. You can verify it's functionality by testing it in hot water with an accurate and detailed thermometer. If it's a problem, get an OEM replacement and go from there.
my 96, after eng is @ norm op temps; moves from say the 10 o'clock to noon position along w/thermostat opening & closing
I can get you the Ford EVTM pin-point test, for a 96, prob is =; but I'll need time to verify color codes and pin numbers are same as your year; so for now;
Visually inspect the wiring harness connection @ sender for corrosion and poor connections.
Testing; "...Pull the R/Wh wire straight off the sender & ground it to the block, intake, or head. Then turn the key to RUN. If the needle pegs, replace the sender. If not, diagnose the circuit.." by Steve83
Lastly check theromstat, it may have failed and that means it is in Open position. Esp noticeable when trying to heat cab in cold weather after, say a mile from cold engine start at low sepeeds.
Replacement & Location in a 94 5.8
Source: by Eric B (BlazenXLT) at http://fullsizebronco.com/forum/showthread.php?t=43022
Testing; "...Pull the R/Wh wire straight off the sender & ground it to the block, intake, or head. Then turn the key to RUN. If the needle pegs, replace the sender. If not, diagnose the circuit