Bring a large pot of salted water to a rolling boil. Add the onions, cover the pot and cook for 5 minutes. Drain the onions, and transfer them to a bath of ice water until cool. Drain them again and peel, trimming the top and bottom, though leave a little of the root end intact. You can make a small slit with a paring knife down the side to make peeling easier.

In a medium saucepan, cook the bacon over medium heat until crisp, then remove it with a slotted spoon to a paper towel–lined plate. Set aside. Pour off all but 2 tablespoons (30 ml) of the bacon fat from the pan. Add the peeled onions and toss to coat in the fat. Add the sherry, and cook until the pan is almost dry, about 3 minutes. Add the cream, bay leaf, thyme, nutmeg and salt. Bring to a boil, then turn down the heat to a gentle simmer.

Partially cover the pot, leaving it a little ajar. Simmer the onions until they are nearly soft when pierced with a paring knife, about 20 minutes, then remove the lid and simmer until the cream is reduced by half, about 10 minutes longer. Remove the bay leaf and the thyme sprigs. Transfer the onions and sauce to a serving dish, and garnish with bacon and a handful of chives.