LadyRSanti,
Me thinks you're stuck manually closing the latch. If you take the wire off it will work again, but you will get locked in the run. My gate latch also has a wire into the run, as you probably saw on the photo, and it will not automatically close with the wire. Without the wire gravity does its job well in dropping the latch when it closes (which locked me in the run once!!), but that doggone wire counters that action and it doesn't work automatically.
There are a few work-arounds I have considered, but not tried:
1. I have wondered if replacing the wire with fishing line might reduce the friction enough that gravity would, once again, take over. Fishing line is slick, light, and flexible.
2. Cut a small, angled block to mount under the gate latch that would tip it forward just a bit, increasing the pull of gravity on the latch in the open position.
3. Drilling the hole out some more in the door frame so the wire doesn't rub. I am considering a 5/16ths hole in combination with fishing line.
4. Putting a very small loop in the wire, an inch back off the latch, and attaching a small spring to the loop and again to the front of the latch body (drilling a small hole). This would pull the wire forward, but there is a balancing point. The spring would have to be strong enough to pull the wire and latch closed but not strong enough to limit the door arm from lifting the latch as it closes.
With my gate latch the wire drags through the hole in the wood and prevents the latch from dropping on it's own. Like you, I have played with the wire, bending it this way and that, but to no avail. One jerk on the pull wire from inside the run and all the fiddling with the wire is for naught. The pivoting latch piece cannot be modified easily to add weight in the right place. Can't drill a hole and bolt on more weight as it would block the action of the latch. Can't hang a weight on the pivoting latch piece because it would block the door arm from entering the latch. I considered using a heavy soldering iron to add solder (weight) to the pivoting latch plate but deemed this as borderline obsessive-compulsive. Besides, it would ruin the finish and I'd have to repaint the latch, which would no doubt gum up the whole shooting match and I'd have to replace the latch.
The more I hash this one out in my mind the more I'm thinking drill out the hole through the door frame and try fishing line instead of wire. Everything else looks too borderline OCD.
HTH!