Temp gague

[its dan dan ey]

i keep getting the overtemp alarm flashing on my dash after a few minutes of running my mk2 gti - even from cold. this has only started within the last few days and, not knowing much about cars, am a little concerned as to what it could be. oil and water topped up nicely  and the temperature gague doesn't seem to rise much above a quarter of the way up - so i am baffled 

if anyone knows anything at all its appreciated 

[its dan dan ey]

UPDATE: some time today, my engine started sounding like a bag of spanners and i was suffering from a real loss of power, maybe 30-40%. oil is fine still (no mayo under oil filler cap), as is water but the temp gague is still flashing after 2-3minutes of driving. it still idles at around 900 rpm but there is a vibration running through the whole of the cabin. this vibration is present during normal driving too. sometimes it clears and starts running again normally without the noise or vibration, but if i stop for traffic or at a junction it becomes present again. HELP! i am getting really worried. i've got it in for a diagnostic at a vw dealership tomorrow, i hope this might clear things up
 :embarassed:
p.s. i'm pretty new to the world of motoring so if i'm asking a stupid question, sorry, but if anyone has any info at all it is appreciated.

[rubjonny]

that light is also a low coolant alarm, you have checked the level right?