The 29-year-old, who lives in Shedfield, clocked times of 51.66sec and 52.30sec in her two heats in PyeongChang, South Korea on Friday.
Having topped the timesheets after the first round, her total of 1min 43.96sec left her third ahead of the final two runs on Saturday lunchtime.
Yarnold, who claimed gold at Sochi in 2014, trails German Jacqueline Loelling by just 0.1sec.
The gold medal will go to the athlete with the lowest cumulative time after all four runs.
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Yarnold followed up her Olympic crown with world and European titles in 2015 before taking a break from the sport.
Originally hailing from Sevenoaks in Kent, she returned to action after getting married and moving from Bath to Hampshire.
Yarnold is the first woman to attempt to defend an Olympic gold in the skeleton.
Team GB’s other contender in the event, Laura Deas, clocked times of 52.00sec and 52.03sec on Friday for a combined 1min 44.03sec.
She will begin the third round of competition, which gets under way at 11.20am on Saturday, in fourth position.
The medals will then be decided on the culmination of the fourth heat, which is scheduled to start at 1.30pm.