Looks like a peep sight to me.
Many such sights are found on older double rifles. It is not uncommon for the sight to pop up from the tang rather than the action opening lever. Here is a link to a rather elaborate such Sauer rifle:

https://www.walterborg.se/sv/auktion/auktion/h17/dubbelstudsare/4655_1


NRA Patron, TSRA, Whittington Center, DWWC,DRSS
Reloading Ballistics App at http://www.xplat.net/