How do you generate a Steam gift?

No your games don't go in your inventory anymore, you can just send a gift to the winner though, but there might be region restrictions.

They removed the ability to make purchased games into inventory gifts a while ago. The ones that were in people's inventories at the time were left as is so there are a few older games in that form still floating around.

Because of how Steam now works, you need to send the game as a gift at the same time you buy the game. This means that if you want to create a giveaway as a Steam gift, you need to plan ahead and it may not work out if you are trying to send a game that is on sale. You can't buy and send the game unless the person is on your friends list and the live in a region where the game does not cost much more than it does for you, I believe it is 10%, but I am not positive.

Sending a game while it is on sale is difficult because after the giveaway ends, you need to add the person on Steam before you will be able to send them the game and SG rules give the winner 7 days to accept the game, so you need to make sure the sale will still be running for a week after the giveaway ends and they are in a region you can send the game to.

I, like many other users, no longer send games directly from Steam. Just buy a key to send from somewhere like Humble, Fanatical, Indie Gala, or another reputable site.

Thank you guys very much!