Gold gains on flat dollar

(Reuters) - Gold edged up on Tuesday in response to a flat dollar and slightly firmer oil prices, but the metal is heading for its third consecutive year of losses on prospects of rising U.S. interest rates.

Gold is likely to end 2015 down nearly 10%, mostly due to expectations that higher U.S. interest rates will hit demand for the non-interest-paying metal.

Spot gold rose 0.2% to $1,070.50 an ounce by 1245 GMT, after losing 0.6% in the previous session. Volumes were thin in the last trading week of the year.

“Over the short-term, the precious metal will likely trend sideways, as funds look to close out the year and contemplate heading into next year with a fresh slate,” INTL FCStone analyst Edward Meir said.

The dollar was 0.1% up against a basket of leading currencies, ahead of U.S. house price and consumer confidence data.

The U.S. currency will continue to be the main driver for gold and its performance going forward, analysts said.

Aided by an improving U.S. economy, the Federal Reserve raised rates for the first time in nearly a decade this month and hinted at gradual increases in 2016.