Storage Method – Preventing White Sugar from Clumping in Canister

White sugar was commonly used as a preservative in the past, in much the same way as salt. It's wildly hygroscopic (like salt), and an excellent desiccant, so if you packed something in it, it would accelerate the drying process. This is actually the origin of fruit jam and fruit preserves, which are still common today, even after better methods of preservation are available.

Salt was more common simply because many things like eating/living in WET sugar, so you had to be careful with how much water was in the thing you were trying to preserve. But as long as the sugar was dry it's an extremely hostile environment for bacteria and little crawly things.

Kept dry, it will last forever.

I would leave the peel in. It can continue to improve the flavor, and makes it look like citrus sugar instead of just plain sugar (important for a gift). Be sure to include a note that it should be used within a few weeks, though.