1989 Toyota Camry temperature gauge problem

I have a 4 cyl, 1989 Toyota Camry with approx 150,000 miles. The termperature gauge is erratic. It appears to register the proper temperature (it never indicates that the engine is overheating), but fluctuates wildly, often returning to the zero position while driving. Could it be a bad connection?

I have changed the timing belt and thermostat at about 140,000. The car runs fine, there are no problems with starting or with the heat.

There was recently a hole in the front exhaust pipe, it was replaced from the catalytic converter forward. The engine was cleaned (due to a power steering fluid leak which was replaced). Since then, there is a faint smell of exhaust in the car just after starting. (Don't know if this could be related).

Thanks.