We present an {sl XMM-Newton} observation of the eclipsing binary Algol which contains an X-ray dark B8V primary and an X-ray bright K2IV secondary. The observation covered the optical secondary eclipse and captured an X-ray flare that was eclipsed by the B star. The EPIC and RGS spectra of Algol in its quiescent state are described by a two-temperature plasma model. The cool component has a temperature around 6.4$times 10^{6}$ K while that of the hot component ranges from 2 to 4.0$times 10^{7}$ K. Coronal abundances of C, N, O, Ne, Mg, Si and Fe were obtained for each component for both the quiescent and the flare phases, with generally upper limits for S and Ar, and C, N, and O for the hot component. F-tests show that the abundances need not to be different between the cool and the hot component and between the quiescent and the flare phase with the exception of Fe. Whereas the Fe abundance of the cool component remains constant at $sim$0.14, the hot component shows an Fe abundance of $sim$0.28, which increases to $sim$0.44 during the flare. This increase is expected from the chromospheric evaporation model. The absorbing column density $N_H$ of the quiescent emission is 2.5$times10^{20}$ cm$^{-2}$, while that of the flare-only emission is significantly lower and consistent with the column density of the interstellar medium. This observation substantiates earlier suggestions of the presence of X-ray absorbing material in the Algol system.
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