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Yellow dye is used to color capes and goblin mail yellow. It is required in the Goblin Diplomacy and Land of the Goblins quests in which players need to make yellow goblin mail.
Yellow dye is obtained by bringing two onions to Aggie in Draynor Village (charges 5 coins) or Ali the Dyer in Pollnivneach (charges 25 coins). It can also be purchased after completion of Mourning's End Part I from Oronwen at the Lletya Seamstress which stocks 10 yellow dyes and sells them for 6 coins each.