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PREPARE OVEN: Preheat the oven to 350°F. Lightly coat a 9x13 baking dish with nonstick spray.
MIX MEATBALL BASE: In a large bowl, add 1 pound lean ground beef, 1 cup Italian bread crumbs, ½ cup whole milk, 2 large eggs, 2 tablespoons ketchup, 1 tablespoon balsamic vinegar, ½ teaspoon ground nutmeg, ½ teaspoon fresh ground black pepper, ½ teaspoon kosher salt, 1 teaspoon onion powder, ½ teaspoon garlic powder, and 2 tablespoons Italian seasoning. Mix gently with your hands until combined. Do not overwork.
SHAPE MEATBALLS: Scoop 1-tablespoon portions and roll into balls. Place them in the prepared 9x13 baking dish in a single layer. Set aside.
MAKE SAUCE: In a medium bowl, whisk together 1 cup ketchup, ¼ cup balsamic vinegar, ¼ cup packed brown sugar, and 1 cup water until smooth.
BAKE: Pour the balsamic sauce evenly over the meatballs. Bake for 30 minutes, or until the meatballs reach 165°F.
GLAZE: Spoon some of the hot sauce from the pan over the meatballs to glaze them before serving.
SERVE: Serve warm with toothpicks for easy grabbing.