If a mythos card with no gate is drawn during step 14 of
Game Setup, discard it and draw again until you draw a
mythos card that depicts a gate.
Source: Arkham Horror Core FAQ or Complete Arkham Horror FAQ, "Rule Changes and Clarifications" (page 2 in both sources)
Using this card when the terror level is increased by 1 would effectively make it increase by 0 and prevent the requirement to place the yellow sign token. Notice the wording of the card is to discard it when the terror level is increased to reduce the amount increased. If it had said something along the lines of discarding it to decrease the terror level, ...