In a large mixing bowl, combine the powdered sugar, sweetened condensed milk, and peppermint extract. Stir with a sturdy wooden spoon until a crumbly, soft dough begins to form. It might look dry at first, but keep mixing.

Lightly dust your work surface with powdered sugar. Turn the mixture out and knead it with your hands. The warmth of your hands will melt the sugar and milk together. Knead until the dough is perfectly smooth and pliable, similar to fondant. If the dough feels too sticky, work in a little more powdered sugar. If it is dry and cracking, add half a teaspoon of condensed milk at a time.

Divide the peppermint dough evenly into three portions. Leave one portion white. Tint one portion with a few drops of red gel food coloring and the last portion with green gel. Knead each ball until the color is evenly distributed with no streaks. If the colors look too light, add a tiny bit more gel.

Roll each colored portion into a long rope about ½ inch thick. Try to keep the ropes uniform in size so the candies finish at the same time. Cut the ropes into small, bite-sized pieces, about ¾ inch each. For a different look, you can roll the pieces into small balls. You can also press them gently with the tines of a fork to create the classic ridged peppermint shape.

Pour some granulated sugar into a small bowl. Roll each piece lightly in the sugar to prevent them from sticking together. Arrange the Soft Christmas Peppermints on a parchment-lined tray in a single layer. Ensure they are not touching each other. Let them dry at room temperature for 24 hours, uncovered. They should form a slight crust on the outside but remain soft and creamy inside.

Once cured, they are ready to eat. Package them for gifts or pile them onto a dessert tray.