I'm pretty sure he's on Cinnabar Island. You need to get HM Surf from the Safari Zone, then sail south from Pallet Town. Eventually you'll get to the island. Then you'll need to complete a "dungeon" to get the key to the gym. The leader is fire-themed.
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The 7th gym leader in Pokemon yellow is in Cinnebar Island, which is south of Pallet Town. You need a Pokemon with Surf to get there.
Candice
snowpoint city
Cinnabar Island
It is in Viridian City. After you have beten the 7th gym leader it is open