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The gauge on '86-on cars is not accurate. It's not the gauge itself, or the sender, that's the problem, but rather a troublesome circuit board add-on that Volvo put on these cars to eliminate troublesome, useless complaints from customers. I know it sounds dubious, but here's the story...
U.S. customers had been complaining (because most new Volvo owners had never before seen a temperature gauge, being used to idiot lights) that their car's temperatures fluctuate -- which is normal. So Volvo (starting in '86) added what's called a "Temperature Compensation Board" (T.C.) to the gauges -- it's a logic circuit wherein the board masks certain fluctuations in temperature and keeps the needle exactly on 9:00 position, unless there's an extreme spike in temperature (or drop). Trouble is, it's never half-way, as it's either normal or extreme -- or in effect, it's been turned into just an idiot light.
But the real trouble is that this T.C. board is prone to fail, and then will beome "psychotic", showing cold and/or hot arbitrarily and (most importantly) untruthfully.
Many folks on this forum, including me, have removed this T.C. board and bypassed it's connections, which turns the gauge into the trustworthy gauge typical of pre-'86 cars!
As long as you have the T.C. board on your car, you can't really know what the coolant's temperature really is. I'd advise using a IR thermometer (e.g., a RayTek, sold by IPD, Griot's Garage, etc.) to scan the thermostat housing or the intake tank of the radiator for a true temperature reading. Then decide if you really need to change the thermostat, and what temperature it should be.
But assuming you've removed the T.C. board, my experinece is that the gauge (accurate, that is) will show 7:30-8:00 with an 87 deg. thermostat, about 9:00 with an 89 deg thermostat, and about 10:00 with a 92 deg. thermostat.
Good luck.
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