These instruments are 'unpsrung', they will read anywhere when the power is off. Only when power is on is the reading 'valid'.
First, check you have both 12v and ground on the gauge. If you have, then disconnect the tan wire from the gauge and see if gauge stays at full cold. If it doesn't, then the guage is faulty. If it does, then reconnect the tan wire at the gauge and disconnect the tan wire at the temp sender on the engine. Gauge reading correctly now (full cold)? if so, replace the sender. If the gauge is still pegged at full hot, then find the damaged wire. It'll be shorted somewhere between the instrument cluster and the engine sender.
Chris.......