Yes, I love that word! If it was borrowed from Celtic it must have happened in the Old Germanic era already. But it was probably inherited directly from Proto-Indo-European.
Old English
dun seems to originally have meant something like 'bright brown, bright dark', like the fur of healthy beasts. It is presumably the first element in Old English names like
Dunstán 'bright dark stone' and
Dunhere/Dunnere 'bright dark warrior'. The latter name has a direct cognate in archaic Dutch
Donner/Donder, still found in the last name
Donners/Donders '(son) of Donner/Donder', not to be confused with
donder 'thunder'. Another, archaic Saxon Dutch (first) name with this element is
Dunnink 'bright dark one', not to be confused with Dutch
dun 'thin'.
But by itself the word was also attested on the mainland as Old Saxon
dun, as a gloss for Latin
spadix 'chestnut brown' (of horses).