Combine orange rind, sugar, and water in a heavy saucepan; bring to a boil. Reduce heat, and simmer 25 minutes, stirring frequently. Remove from heat; drain orange rind, and set aside to cool. Reserve liquid; set aside and let cool.
Sift together flour, baking powder, sugar, and salt in a large bowl. Combine reserved orange liquid, egg, and milk; add to flour mixture, stirring just until dry ingredients are moistened. Stir in orange rind.
Pour batter into a greased 9- x 5- x 3-inch loaf pan. Bake at 350° for 1 hour or until wooden pick inserted in center comes out clean. Cool 10 minutes. Remove from pan; cool completely on wire rack.