Cut potatoes into ½- to ¾-inch cubes and put them into a medium saucepan. (Leave skins on.) Add enough cold water to cover the tops of the potato cubes.Add ½ teaspoon of kosher salt to the water, cover the pot, and bring the potatoes to a boil. Simmer for about 15 minutes, or until tender but still firm.
While the potatoes are simmering, cook the bacon pieces in a 10-inch Dutch oven over medium heat until crisp. Remove from heat.Remove the bacon pieces from the pan and set aside. Leave bacon drippings in pan.
Return pan to medium heat, and sauté the onion in the reserved bacon drippings.
Reduce heat on the sautéed red onions down to medium-low. Add the vinegar, sugar, water, celery seeds, and 1 teaspoon of kosher salt.
Heat onion-vinegar mixture a low simmer. Remove from heat.When the potatoes are done cooking, drain them in a colander, and then immediately add them to the onion-vinegar mixture in the Dutch oven.Make sure liquid and potatoes and both very hot when mixed together.If the vinegar mixture in done before the potatoes are cooked, remove it from the heat, then reheat it for a minute just before you add the potatoes.
Add the cooked bacon pieces to the potatoes and vinegar mix, and stir everything together gently to combine.
Season to taste with salt and pepper.Bake uncovered in the Dutch oven or a casserole dish for 30 minutes at 325°F (163°C).
Notes
Sealed in an air-tight container in the fridge, hot German potato salad will stay good for up to a week.German Potato Salad is always better the second day! Prepare it ahead of time and simply reheat (or serve cold) when you're ready to serve it.