* Fed won’t raise rates on fear of inflation -Powell * U.S. factory activity climbed to a record high in June (New throughout, updates prices, market activity and comments) June 23 (Reuters) - Gold prices rose on Wednesday, up further from the seven-week lows hit late last week, lifted as the U.S. dollar weakened a day after Federal Reserve Chair Jerome Powell said inflation would not be the only determinant of interest rate decisions. Spot gold rose 0.4% to $1,785.32 per ounce by 12:34 pm EDT (1634 GMT) and U.S. gold futures were up 0.5% to $1,786.60. Powell’s words on Tuesday calmed investors who had worried about policy tightening following last week’s hawkish turn by the Fed. The softer dollar, down 0.1%, reduced gold’s cost for holders of other currencies. Markets broadly shrugged off U.S. PMI data showing factory activity at a record high in June. Still, the precious metal has failed to claw back all of last week’s 6% drop on fears of higher interest rates that would raise the opportunity cost of holding non-yielding bullion. But David Meger, director of metals trading at High Ridge Futures, said it was not a foregone conclusion the Fed would move to raise interest rates or reduce asset purchases as quickly as last week’s meeting suggested. “We’re clearly trading in a very accommodative environment that will underpin gold prices (and) overall it’s still too early to start making mention of reduction in asset purchases and increases in interest rates,” Meger said. Technicals were supportive too, Quantitative Commodity Research analyst Peter Fertig said, noting gold appeared to have bottomed out from last week’s selloff. While the gold market’s pricing for Fed hikes could prove too hawkish, the underlying inflation trends will likely remain distorted for months, inhibiting positive flows into gold for now, TD Securities analysts said in a note. Elsewhere, silver rose 1.3% to $26.08 per ounce and palladium climbed 2.8% to $2,629.45. Platinum was up 1.1% to $1,091.08. (Reporting by Nakul Iyer in Bengaluru; editing by Sujata Rao, Barbara Lewis and David Gregorio) Our Standards: The Thomson Reuters Trust Principles.